Sub-Clause 1.
15: Limitation of Liability
Written by George Rosenberg1
The substance of this provision was already
in Sub-Clause 17.6 in the 1999 edition and
has now been separated from other
provisions dealing with Risk and
Responsibility.
As before it generally exempts parties from liability
to the other for “loss of use of any Works, loss of
profit, loss of any contract or any indirect or
consequential loss” except in respect of a list of
identified Sub-Clauses. The list has been extended
and several of the changes are very significant. It
also limits liability to certain levels in some
circumstances. Finally, it excludes parties from
cover by the exemption and limits in certain
circumstances. All three elements have changed.
Two additions are particularly noteworthy. The
interaction between this Sub-Clause and Sub-
Clause 8.8 insofar as it relates to the liability-
limiting effect of Delay Damages is confusing and it
is very unclear what the final result should be taken
to mean. There is also a similar lack of clarity in
the way in which the Sub-Clause applies the
exemption to Sub-Clause 13.3.1(c) (proposals for
valuation of variations).
Exceptions to exemption from liability to
the other party for loss of use of any Works,
loss of profit, loss of any contract or any
indirect or consequential loss
The list of exceptions to the exemptions from
liability in the 1999 edition extended to only 2
items (Payment on Termination and Indemnities).
It is now extended to some additional items.
It should be noted that the wording of the Sub-
Clause goes further than merely to negate the
exemption from of liability for these items. It says
that “neither party shall be liable for loss of profit”
etc. … “other than under…” . Thus, if the party can
show such loss, it confers an express right to claim
1
George Rosenberg is a Consultantat Corbett & Co. International Construction Lawyers Ltd. He can be contacted at george.rosenberg@corbett.co.uk
LimitationOfLiability/GR/2018(1)/1/CLAL
such loss. Normal rules of the underlying law of
the contract (unless mandatory) are thus excluded.
Where the Sub-Clause to which the exception
applies clearly sets out the loss or damage which
this exclusion from exemption refers to this does
not raise an issue. However, there are issues in
respect of the cross reference to Sub-Clauses 8.8
and 13.3.1(c).
The new items are:
Sub-Clause 8.8 [Delay Damages]
Sub Clause 8.8 already states that “this Sub-Clause
shall not limit the Contractor’s liability for Delay
Damages in any case of fraud, gross negligence,
deliberate default or reckless misconduct by the
Contractor.” Thus, if the Contractor is guilty of one
these types of misbehaviour it will not be able to
take advantage of the cap on Delay Damages. The
lifting of the limitation in the Sub-Clause partly
duplicates the last paragraph of Sub-Clause 1.15.
This paragraph also lifts the limit in such
circumstances but goes further in allowing the
general limit of liability under the Contract to be
exceeded.
As noted above Sub-Clause 1.15 is divided into two
parts. The first lifts the exclusion of liability for
loss of profit etc. The second lifts the limits of
liability under the Contract.
The reference to Sub-Clause 8.8 in Sub-Clause 1.15
is under the first part and thus is intended to
remove the exemption from liability for losses of
profit when applying Delay Damages. Since Sub-
Clause 8.8 provides that Delay Damages are the
only damages due from the Contractor for failure to
meet the Completion Date, except in the event of
Termination Under Sub-Clause 15.2 [Termination
for Contractor’s Default] it would therefore seem
that the exclusion is intended to prevent arguments
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that Delay Damages incorporate loss of profits and
to allow for the possibility of loss of profit claims in
the event that the Contractor is terminated for
cause. If the latter were the case one would have
thought that Sub-Clause 1.15 would include Sub-
Clause 15.2 (or more correctly Sub-Clause 15.4) in
the list. There may, however be an argument that
an Employer is now entitled to claim loss of profit
following termination for cause.
Sub-paragraph (c) of Sub-Clause 13.3.1
[Variation by Instruction]
13.3.1(c) is the provision which requires the
Contractor, when carrying out a Variation
instruction, to provide the Engineer with a proposal
for adjustment of the Contract Price. It specifically
sets out the right to include any costs resulting
from the omission of any work. In particular it
allows the Contractor to claim loss of profit, and
other losses or damage it suffers, when it has
agreed that work should be omitted to be carried
out by others.
A simple reading would say that the exception to
the normal exclusion is only intended to apply to
the Contractor’s rights following an agreed
omission in circumstances where the omission was
ordered so that the work could be carried out by
others. However, the exception is more widely
expressed. It does not seem possible to read it
down to prevent the Contractor claiming for loss of
profit etc. as part of the costs it incurs in the case of
any omission.
However Sub-Clause 13.3.1(c) does not only cover
omissions. It also covers all adjustments to the
Contract Price following variations. It would thus
seem arguable that the Contractor is entitled to
include loss of profit etc. in all its Variation
valuation proposals if there is a basis for it in the
circumstances. For example, a very substantial
Variation, which the Contractor is required to carry
out on the basis of rates which cause it a loss, or
which force it to use resources which might have
been more profitably employed elsewhere, might
open the door to a claim for the loss of profit etc.
LimitationOfLiability/GR/2018(1)/1/CLAL
It is doubtful that it was FIDIC’s intention to open
the door to such arguments. However, the reading
of the Contract which leads to this conclusion is a
reasonable one and it is altogether possible that a
tribunal confronted with the issue will reach this
conclusion.
See comment on the last paragraph of 1.15 below
for the consequences as regards non-consensual
omissions intended to allow the Employer to have
the work completed by others.
Sub-Clause 15.7 [Payment after
Termination for Employer’s Convenience]
Sub-Clause 15.6 in the new edition is a significant
departure from the 1999 edition in that it gives the
Contractor entitlement to claim “loss of profit and
other losses and damages suffered by the
Contractor as a result of this termination”. Sub-
Clause 15.7 only refers to the obligation to pay the
amount certified under Sub-Clause 15.6. The
exception ought to have referred to Sub-Clause
15.6, though the intention is obvious. It is notable
that 15.6 only refers to “loss of profit and other
losses and damages” whereas 1.15 allows claims for
“loss of profit, loss of any contract or any indirect
or consequential loss”. Thus, Sub-Clause 1.15
appears to have the effect of expanding the
categories of loss which might have been claimable
on a reading of Sub-Clause 15.6 standing alone.
Sub-Clause 16.4 [Payment after
Termination by Contractor]
Sub-Clause 16.4 already includes a right to payment
of loss of profit although it also refers only to “loss
of profit or other losses or damages”. so, as with
Sub-Clause 15.7, there may be scope for a wider
claim.
Sub-Clause 17.3 [Intellectual and Industrial
Property Rights]
Under Sub-Clause 17.3 the Employer and the
Contractor each indemnify the other against any
claims which may arise where the other faces a
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claim resulting from a breach of intellectual or
industrial property rights caused by the other. The
purpose of this exception is presumably to
overcome any suggestion that the costs the
indemnified party faces are excluded as indirect or
consequential.
Limit on Total Liability
This provision was in the 1999 edition and is to the
same effect.
Exclusion from Limits on Liability
This provision prevents the parties escaping from
liability in the case of fraud, gross negligence,
deliberate default or reckless misconduct. The
term “gross negligence” has been added to the 2017
edition version.
This may have substantially different results
depending on which Law applies to the contract.
In a very interesting treatment of the subject
recently presented to the Society for Construction
law in London2 the authors quoted a passage from
a Court of Appeal case Armitage v Nurse3 as
follows:
“It would be very surprising if our law drew the
line between liability for ordinary negligence and
liability for gross negligence. In this respect
English law differs from civil law systems, for it
has always drawn a sharp distinction between
negligence, however gross, on the one hand and
fraud bad faith and wilful misconduct on the other
... we regard the difference between negligence
and gross negligence as merely one of degree ...
civil systems draw the line in a different place. The
doctrine is culpa lata dolo aequiparatur [gross
negligence is equal to fraud]; and although the
maxim itself is not Roman the principle is
classical. There is no room for the maxim in the
common law.” 4
2 3
Exclusions from Immunity: Gross Negligence and Wilful Misconduct,
James Pickavance and James Bowling SCL October 2017
LimitationOfLiability/GR/2018(1)/1/CLAL
However as far as the English Law is concerned, the
Courts will recognise an express contractual
agreement that gross negligence (rather than mere
negligence) will attract liability.
The distinction between ordinary and gross
negligence is not easy to define in abstract terms
and the authors of the SCL paper after considering
numerous authorities have suggested the following
set of tests.
“52. However, where the term is not defined
(which seems to be more usual), then we suggest
the authorities identify the following seven factors
as relevant to determining whether “gross”
negligence has occurred:
i. Was the nature of the error serious,
involving a high degree of risk?
ii. Was the conduct undertaken with an
appreciationof the risks, but with a
blatant disregard of or indifference
to an obvious risk?
iii. That disregard or indifference need not be
conscious, or deliberate; it is sufficient that
the reasonably competent professional in
the defendant’s position would have
considered the action or inaction to amount
to a blatant disregard of or indifference to
the relevant risk. Conscious
disregard/recklessness will however
be a likely aggravating factor, and
more likely to led to a finding of gross
negligence.
iv. Were the potential consequences of
the action or inaction serious? The
more serious the consequences, the more
likely the negligence will be gross.
v. Had the same or similar consequences
arisen out of the same or similar action or
[1997] EWCA Civ 1279, [1997] 2 All ER 705, [1997] 3 WLR 1046
4
Armitage v Nurse Note 14 [1997] 3 WLR 1046 para [254]
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 inaction before? In other words, was it a
repeat error?
Article Author
vi. How likely was it that the George Rosenberg6
consequence would occur? Again, the
more objectively likely it was to occur, the
more likely a finding of gross negligence.

vii. What precautions were taken (if

any) to prevent the consequence
occurring? The more obvious and modest
the steps, and the greater and more likely
the risk, the more likely it is that the Email: george.rosenberg@corbett.co.uk
conduct in question will veer towards gross
negligence.”

Thus the test to be applied under common law

systems before deciding whether a party can escape
from liability differs considerably from that under
civil systems. In the former a high degree of
negligence will make a party liable but in the latter
only fraud will enable them to escape. It may well
be that some common law and civil systems apply a
different test and parties will need to take local
legal advice before deciding what the limitation on
exclusion means in practice.5

Quite apart from this surprising change it should be

noted that the exclusion probably does not prevent
a Contractor faced with a non-consensual omission
by the Engineer in order to allow the Employer to
have the works carried out by others from claiming
loss of profit. Such an omission is forbidden under
Sub-Clause 13.1 unless the Contractor agrees. It
would therefore be a breach of contract on the
Employer’s part and any loss recognised in
damages. Since the breach would be deliberate the
Employer would not be entitled to protection from
a claim for loss of profit.

5 In the Guidance included in the 2017 edition FIDIC notes that “under
a number of legal systems (notably in some common law jurisdictions)
the term ‘gross negligence’ has no clear definition and, as such, is often
avoided in legal documents.” In the general commentary on the
definitions it is suggested that a typical additional definition might be
“Gross Negligence means any act or omission of a party which is
contrary to the most elementary rules of diligence which a conscientious
employer or contractor would have observed in similar circumstances,
and /or which show serious reckless disregard for the consequences of
such an act or omission. It involves materially more want of care than
mere inadvertence or simple negligence.” Although one might wonder
what the difference is between “serious reckless disregard” and “reckless
disregard”, it would seem to be sensible to include a definition of what is
meant by “gross negligence” and this definition has the benefit of
improving the level of certainty.
6
The contents of this article should not be treated as legal advice. Please
contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

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Clause 2: The Employer
Written by Edward Corbett 1

Clause 2 now has 6 sub-clauses:

Employer’s claims has been removed to clause 20;

and new provisions 2.5 [Site Data and Items of
Reference] and 2.6 [Employer-Supplied Materials
and Employer’s Equipment] have been added.

The obligations to provide possession, access and

assistance with permits etc.are essentially the same,
as are the consequences of failure to do so. The
main change to clause 2.4 [Employer’s Financial
Arrangements] is that the Employer now sets out
his arrangements in the Contract Data; and the
Contractor can only request evidence of ability to
pay if those arrangements change, there is non-
payment or there are variations in excess of 30% or
a single variation over 10%.

Clause 2.5 has gathered Employer’s obligations

from clauses 4.7 (re survey points) and 4.10 (re site
data) of the 1999 forms in a worthy effort to place
all such obligations in clause 2.

Clause 2.6 says, rather pointlessly, that if the

Employer’s Requirements specify that materials
and equipment are to be provided by the Employer,
he should provide them. The Contractor is to take
responsibility for equipment used.

Article Author
Edward Corbett 2

Email: edward.corbett@corbett.co.uk

1
Edward Corbett is a Director at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at edward.corbett@corbett.co.uk
2
The contents of this article should not be treated as legal advice. Please contact the lawyers at Corbett & Co before acting on or relying upon anything stated
in this article.

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1
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Clause 3: The Engineer
Written by Victoria Tyson1
The main changes: Employer’s consent and
neutrality
The main changes in Clause 3 are the express
provisions in Sub-Clause 3.2 [Engineer’s Duties
and Authority] that the Engineer is not required to
obtain the Employer’s consent before the Engineer
exercises its authority under Sub-Clause 3.7
[Agreement or Determination], and that the
Engineer must act “neutrally” when exercising its
duties under Sub-Clause 3.7 [Agreement or
Determination]. Dictionary definitions suggest
that “neutrally” is similar in meaning to the words
“independently” or “impartially” found in the
FIDIC Red Book 4th edition and the FIDIC Yellow
Book 3rd edition. However, the drafting committee
believe that by using a different word it will avoid
the difficulties raised in the interpretation of
independently or impartially in the FIDIC 3rd and
4th editions. This remains to be seen. The intention
is that “the Engineer treats both Parties even-
handedly, in a fair minded and unbiased
manner”2.
Instructions and Variations
Another significant change is the Contractor’s right
under Sub-Clause 3.5 [Engineer’s Instructions] to
“immediately” and “before commencing any work
related to the instruction” give Notice to the
Engineer that an Engineer’s instruction which is
“necessary for the execution of the Works” but is
not expressly stated to be a Variation, constitutes:
• a Variation, or
• involves work that is already part of an existing
Variation, or
• does not comply with applicable Laws, or
• will reduce safety of the Works, or
• is technically impossible.
1
Victoria Tyson is a director at Corbett & Co. International Construction Lawyers Ltd. She can be contacted at victoria.tyson@corbett.co.uk.
2
Guidance for the Preparation of Particular Conditions, page 21, Sub-Clause 3.7.
TheEngineer/VT/2018(1)/3/CLAL
The purpose of this drafting is to accelerate the
resolution of Variation challenges and give the
Employer more budget certainty and control. If the
Contractor fails to give such Notice “immediately”
and “before commencing any work related to the
instruction” it will be in breach of the Contract
entitling the Employer to damages if the Engineer
has suffered a loss. There is a lack of express
wording to indicate that it would also amount to a
time-bar.
The Engineer must respond to the Contractor’s
Notice within 7 days of receiving it, by giving a
Notice confirming, reversing or varying the
instruction. Curiously, the Engineer’s response
does not need to address the Variation question, it
just needs to confirm, reverse or vary the
instruction. The Contractor is expressly “bound by
the terms of the Engineer’s response”. If the
Engineer does not respond within the prescribed
time the instruction is deemed to be revoked.
At the FIDIC Users’ Conference London, December
2017, Michael Sergeant identified the risk of an
impasse where the Contractor thinks the work is a
Variation and will not carry it out unless the
Engineer issues a formal Variation Instruction, but
the Employer/Engineer thinks the work is not a
Variation and will not issue a Variation Instruction
because the Employer will have to pay. It seems
that the intention of the drafting committee is for
the Parties to proceed with the work, and leave the
argument as to whether or not the instruction
constituted a Variation to be resolved under the
claims procedure. Therefore, if the Engineer
confirms the instruction but the Contractor
remains of the opinion that it constitutes a
Variation the Contractor would need to proceed
with the work (so as not to be in breach of contract)
and pursue a claim under Sub-Clause 20.1.
However, this is not expressly stated in Clause 3
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(there is no reference to Clause 20), will cause delay
and may be an unsatisfactory process particularly
for the Contractor who will have more negotiating
power at the start of a project when the Employer is
keen to proceed with the Works.
Time Limits
A further important change concerns the time an
Engineer has to make a fair determination under
Sub-Clause 3.7.3 [Time limits]. There are now two
separate 42-day periods in this clause, (i) 42 days
for the Engineer to give Notice of the Parties
Agreement if agreement is achieved, and if no
agreement is reached (ii) a further 42 days for the
Engineer to give Notice of the Engineer’s
Determination. Consequently, the time in which
the Engineer must make a determination is now 84
days. This is an improvement to the open ended
FIDIC 1999 editions, where the Engineer was
obliged to (i) respond to a claim or any further
particulars supporting a previous claim with
approval, or with disapproval and detailed
comments under Sub-Clause 20.1 within a single
42-day period, and (ii) make a fair determination
under Sub-Clause 3.5 for which there was no time-
limit. These FIDIC 2017 time limits may be
amended if proposed by the Engineer and accepted
by the parties. If the Engineer does not give the
Notice either (i) the Claim is rejected, i.e. it is
resolved against the claiming Party, or (ii) the
matter to be agreed or determined is deemed to be
a Dispute which may be referred by either Party to
the DAAB for its decision under Sub-Clause 21.4
[Obtaining DAAB’s Decision] without the need for
NOD.
Under Sub-Clause 3.7.5 [Dissatisfaction with the
Engineer’s determination] the Engineer’s
determination becomes final and binding unless a
dissatisfied Party gives a Notice of Dissatisfaction
(NOD) to the other Party (c.c. the Engineer) within
28 days after receiving the Engineer’s
determination under Sub-Clause 3.7.2 [Engineer’s
Determination] (or corrected version thereof)
stating that it is a “Notice of Dissatisfaction with
the Engineer’s Determination” and setting out the
TheEngineer/VT/2018(1)/3/CLAL
reasons for the dissatisfaction. The 28-day time
bar is not waivable under Sub-Clause 20.2.5
[Agreement or determination of the Claim]. Under
Sub-Clause 21.4.1 [Reference of a Dispute to the
DAB] the dispute must then be referred to the
DAAB within 42 days of a NOD, failing which the
NOD lapses and the determination becomes final
and binding. Again, there is no waiver.
Other changes to note include:
• The Engineer must now be a “professional
engineer” with suitable qualifications,
experience and competence. He/she must also
be fluent in the ruling language. (Sub-Clause 3.1
[The Engineer].) It has been suggested that the
new provisions may pose difficulties for those
Employers who like to appoint project managers
(who are generally less expensive than
professional engineers) in to the role. Further, it
is important to note that professional engineers
who are members of recognised institutions will
be bound by certain codes of conduct. There is
no express requirement for the Engineer to be
based at Site for the whole time the Works are
being executed.
• In the FIDIC 4th edition there was provision for
an Engineer’s Representative. The Engineer’s
Representative was removed from the FIDIC
1999 but has been reintroduced into the FIDIC
2017. (Sub-Clause 3.3 [The Engineer’s
Representative].) The Engineer may appoint a
project manager in to this role. The Engineer’s
Representative must be based at the Site for the
whole time the Works are being executed and
therefore a prudent Engineer might appoint a
deputy Engineer’s Representative in order to
minimise the impact of any unforeseen
absences. There is no express requirement that
the Engineer's Representative be fluent in the
ruling language defined in Sub-Clause 1.4, as the
Engineer is required to be under Sub-Clause 3.2
[Engineer’s Duties and Authority], and the
assistants are required to be under Sub-Clause
3.4 [Delegation by the Engineer] (unless the
Engineer’s Representative is also an assistant).
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• The Engineer may delegate duties and authority
Article Author
to act to assistants (such as design engineers,
other construction professionals, technicians, Victoria Tyson3
inspectors and/or specialist independent
engineers and/or inspectors appointed to
monitor and review the execution of the Works).
It is likely that such assistants will have a major
role in the achievement of a successful project
and be given whatever formal title is considered
by the Engineer to be appropriate. However,
the Engineer may not delegate authority to act
Email: victoria.tyson@corbett.co.uk
under Sub-Clause 3.7 [Agreement or
Determinations] and/or issue a Notice to
Correct under Sub-Clause 15.1 [Notice to
Correct]. (Sub-Clause 3.4 [Delegation by the
Engineer].)

• The Employer may now immediately replace the

Engineer on a temporary basis if the Engineer is
unable to act as a result of death, illness,
disability or resignation. (Sub-Clause 3.6
[Replacement of the Engineer].)

• If an error of a typographical, clerical or

arithmetical nature is found in the
determination or, remarkably, a signed
agreement between the parties, the Engineer
may correct it. (Sub-Clause 3.7.4. [Effect of the
agreement or determination].)

• The new wording at Sub-Clause 3.8 [Meetings]

is a development of the optional clause found in
the FIDIC 1999 editions, now covering both
future work and/or other matters in connection
with the Works. The Engineer is obliged to take
a record of the meeting but there is no
requirement that the Contractor or other
attendees agree this record. Therefore, the
Contractor or other attendees should point out
any differences in the record from their
understanding of the meeting promptly and in
writing.

3
The contents of this article should not be treated as legal advice. Please
contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

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Clause 4: The Contractor
Written by Taner Dedezade 1
The main changes to Clause 4 are:
• The requirement in Sub-Clause 4.1
[Contractor’s General Obligations] that the
fitness for purpose obligation must be defined
in the Employer’s Requirements (and not
elsewhere in the Contract) and in the absence of
a definition for purpose, the obligation will be
“ordinary purpose”;
• The ability in Sub-Clause 4.2 [Performance
Security] for the Employer to instruct the
Contractor to increase or decrease the
Performance Security in the event of Variations
that result in an accumulative increase or
decrease by more than 20% of the Contract
Price.
• In Sub-Clause 4.3 [Contractor’s
Representative], the Contractor’s
Representative shall be responsible for issuing
and receiving Notices and other
communications under Sub-Clause 1.3.
• In Sub-Clause 4.4 [Subcontractors], it is now
possible for a percentage to be included in the
Contract Data setting out the limits of
subcontracting.
• Sub-Clause 4.5 [Nominated Subcontractors]
has been expanded but restricted to
circumstances in which Plant, Materials, works
or services are to be purchased by the
Contractor from a nominated subcontractor
under Sub-Clause 13.4(b) [Provisional Sums].
• In Sub-Clause 4.6 [Co-operation], the 2017
edition affords the Contractor a claims
opportunity if it suffers delay and/or incurs
Cost.
• Sub-Clauses 4.7 [Setting Out]; 4.8 [Health and
Safety Obligations] and 4.9 [Quality
1
Taner Dedezade is a Barrister at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at taner.d@corbett.co.uk
1
TheEngineer/TD/2018(1)/4/CLAL
Management and Compliance Verification
Systems] retain the same character as the 1999
edition but have become enhanced and more
prescribed in the 2017 edition.
• As with the 1999 edition, Sub-Clause 4.10 [Use
of Site Data] and 4.12 [Unforeseeable Physical
Conditions] need to be considered together.
Important parts of Sub-Clause of 4.10 have
been cut and pasted into a new Sub-Clause 2.5.
There is an increased obligation to give
information about the effects of climatic
conditions at the Site in Sub-Clause 4.10(b). In
relation to Sub-Clause 4.12 which hinges on the
concept of unforeseeability, it should be noted
that there has been a change in the timing in
the definition of Unforeseeable. The benchmark
of the ‘date for submission of the Tender’ has
been replaced by the ‘Base Date’ in both the
definition of Unforeseeable and in Sub-Clause
4.12.5.
• Sub-Clause 4.15 [Access Routes], allocates more
risk to the Contractor in the 2017 edition as
now the Contractor must take “all necessary
measures to prevent any road or bridge from
being damaged by the Contractor’s traffic or
by the Contractor’s Personnel”. There is a new
entitlement for a Contractor to claim time and
money if the extent of non-suitability or non-
availability of an access route arises as a result
of changes to that access route by the Employer
or a third party after the Base Date.
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 Article Author
Taner Dedezade 2

Email: taner.d@corbett.co.uk

2
The contents of this article should not be treated as legal advice. Please
contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

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Clause 5: Design
Written by Taner Dedezade 1

The main changes to Clause 5 are as follows:

• In Sub-Clause 5.8 [Design Error], a new
• Sub-Clause 5.1 [General Design Obligations]
has been slightly enhanced by specifying with
more particularity the qualifications required of
designers and stating in terms that designers
need to be qualified and entitled under the
applicable law. The key change is structural in
that part of the clause has been extracted and
moved into Sub-Clause 1.9 [Errors in the
Employer’s Requirements].
procedure has been put in place that provides
that if errors, omissions, ambiguities,
inconsistencies, inadequacies or other defects
are found which were previously the subject of a
No-objection, then the process set out for a
failure under Sub-Clause 5.2.2 should be
engaged, hence giving the Contractor a process
for revising and re-submitting the Contractor’s
Documents.

• Sub-Clause 5.2 [Contractor’s Documents] in the

Article Author
1999 edition was one of the longest clauses
taking up just over one page (at pages 20 and Taner Dedezade 2
21) with the last sentence of the clause
(appearing in isolation on the top of page 22)
stating “Any such approval or consent, or any
review (under this Sub-Clause or otherwise),
shall not relieve the Contractor from any
obligation or responsibility”.

Under the 1999 edition, in relation to

documents submitted to it for approval, the Email: taner.d@corbett.co.uk
Engineer essentially had 3 options: 1) rejecting
the document for approval; 2) approving the
document with comments; 3) approving the
document without comments. In the 2017
edition, the meaning of the clause remains the
same, with enhanced definitions and sub-
headings, the key change being a change in
emphasis of terminology: there is now an
absence of the use of the word “approval” and a
move to “No-objection”.

Within the review period, the Engineer has

been given two options: 1) finding that the
Contractor’s Document fails to comply with the
Employer’s Requirements; or 2) giving No-
objection (although he may include comments
concerning minor matters which will not
substantially affect the Works).

1
Taner Dedezade is a Barrister at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at taner.d@corbett.co.uk
2
The contents of this article should not be treated as legal advice. Please contact the lawyers at Corbett & Co before acting on or relying upon anything stated
in this article.

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1
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Clause 6: Staff and Labour
Written by Gabriel Mulero Clas 1

The 2017 Clause 6 is largely the same as its • The role of the health and safety officer
1999 counterpart. However, it contains (accident prevention officer in FIDIC 1999) has
some notable additions and differences, the been slightly emphasised.
most glaring of which is the addition of a
new type of staff/labourer to the • The importance of fluency in the language of
Contractor’s Personnel called Key communications has been reinforced.
Personnel in Sub-Clause 6.12.
• The Engineer now has the added right to
It only applies if such personnel are specified in the request the removal of personnel who have
Employer’s Requirements and the important aspect engaged in corruption or fraud or who have
of this provision is not what this type of personnel been employed from the Employer.
does but that their appointment and presence is
strictly regulated. • The Contractor’s obligations to maintain
records have been enhanced and include
They are named in the Tender and substitutions Personnel, Equipment, Plant, Materials and
and dismissals need the Engineer’s consent. They Temporary Works and must specify work
also need to be based on Site for the whole period activity, location and day of work.
of the Works. This is perhaps to avoid too much
change of important employees of the Contractor
and to ensure that their focus is on the project at Article Author
hand. Gabriel Mulero Clas2
Other changes include:

• The 1999 edition prohibited the Contractor

from hiring of the Employer’s Personnel in Sub-
Clause 6.3 and the 2017 edition has imposed
the same obligation on the Employer and the
Engineer vis-à-vis the Contractor.
Email: gabriel.muleroclas@corbett.co.uk
• The Contractor’s obligation to follow
employment laws including wages and working
hours has become clearer.

• If work needs to be carried out outside normal

workdays and working hours, the Contractor
now needs to give Notice to this effect.

1
Gabriel Mulero Clas is a Lawyer at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at gabriel.muleroclas@corbett.co.uk
2
The contents of this article should not be treated as legal advice. Please contact the lawyers at Corbett & Co before acting on or relying upon anything stated
in this article.

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Clause 7: Plant, Materials and Workmanship
Written by George Rosenberg 1
Clause 7 deals with a variety of issues
relating to Plant Materials and
Workmanship. All sub clauses have been
subject to some change – in several cases of
significance.
Manner of Execution (7.1)
The 1999 edition only applied the obligations under
7.1 to manufacture of Plant, production and
manufacture of materials and generally to the
execution of the Works. It is now extended to cover
manufacture, supply, installation, testing and
commissioning and/or repair of Plant, the
production, manufacture, supply and testing of
Materials, and all other operations and activities
during the execution of the Works.Bullet point text.
Samples (7.2)
The 1999 edition inappropriately required samples
to be submitted for testing in the same way as
documents. This has not been fully remedied. A
detailed process is set out in 7.5 where a sample is
rejected on inspection but no time limits or process
for inspection or provision for re-submission where
the issue is not one which would lead to rejection
on the basis of a defect is provided.
Inspection (7.3)
As in the 1999 edition Notices of availability for
inspection have to be provided to the Engineer, but
the inspections are carried out by the Employer’s
Personnel.
An express power to make records and take
photographs and video recordings has been added.
Access is now required to be provided in a safe
manner.
1
George Rosenberg is a Consultantat at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at george.rosenberg@corbett.co.uk
1
PlantMaterialsAndWorkmanship/GR/2018(1)/7/CLAL
There is now an express right for the Contractor to
proceed to cover up work or material which would
otherwise need to be inspected if the Engineer does
not respond to the Contractor’s notice advising that
an inspection may be carried out, or the Employer’s
Personnel do not make the inspection at the
notified time.
Testing by the Contractor (7.4)
In addition to previous provisions the Contractor is
now required to provide the temporary supplies of
electricity and water necessary for any testing and
his staff must be competent enough to ensure the
tests are carried out properly.
The Contractor is required to give Notice to the
Engineer of the time and place it plans to test. This
is to be given at a reasonable time to enable the
Employer’s Personnel to attend. This is a change
from the 1999 edition but the only indication in the
Clause that it is Employer’s Personnel rather than
the Engineer who will attend. Later provisions all
refer to the Engineer and indeed impose sanctions
if he does not appear. There is clearly an error
either here or in the later provisions. Whereas the
1999 edition required the Contractor and the
Engineer to agree the times and places for testing,
the Contractor now simply notifies the Engineer
giving a reasonable time.
A new provision requires the Engineer to issue a
VO where he wants the Contractor to change the
location or timing or details of specified tests. The
use of a VO may be appropriate where there are
additional tests to be carried out and, perhaps,
where there is a significant change to the location
or timing of tests. However, the VO procedure is a
time consuming and complex one and it is difficult
to see why most changes could not be initiated by
simple instruction. Indeed, the following
paragraph provides for that. It is not clear which
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provision is intended to apply. It appears that at
least as far as timing is concerned, the Engineer has
an option as to whether to proceed by Notice or
Variation. If this is the case, the Engineer is
probably best to avoid the use of the Variation
power, as this introduces rights to object which
could complicate the process.
The Engineer formerly was required to give at least
24 hours’ notice of his intention to attend the tests.
This has been extended to 72 hours.
The Employer is now given the right to claim Costs
where these are incurred as a result of a delay of the
Contractor.
In an error which has been carried over
uncorrected from the 1999 edition, in the event of
the failure of the Engineer to attend at the time
notified he is deemed to be present. However, a
subsequent paragraph states that if he has not
attended the tests he is deemed to accept them as
accurate. Thus there seems to be no provision by
which the Engineer may be deemed to have
accepted the tests as accurate.
Defects and Rejection (7.5)
In the 1999 edition this provision did not elaborate
on what would happen if the Contractor failed to
remedy rejected inspected items. The remedies
have been substantially elaborated.
The process through which the Engineer has to go
to seek a remedy where defective items are found
on inspection has been formalised – now requiring
a formal Notice from the Engineer and a formal
proposal from the Contractor. This will then be
reviewed by the Engineer who may (within 14 days)
give a Notice of the extent to which the proposal
does not comply with the Contract. There can be a
further exchange. If the Engineer does not give his
14 day notice there is a deemed Notice of No-
objection.
If the Contractor fails to submit a proposal or fails
to carry it out, there is provision for the Engineer to
instruct the Contractor as to what he should do (see
2
PlantMaterialsAndWorkmanship/GR/2018(1)/7/CLAL
7.6) or give a Notice of Rejection. In the latter case
Sub-Clause 11.4(a) [Failure to Remedy Defects]
comes into play. “Fail” is normally an absolute term
but this would make nonsense of the Sub-Clause
and presumably “fail” here is intended to mean
“fail in whole or in part”.
This allows the Employer to carry out the necessary
work to recover its reasonable costs.
There was no provision in the 1999 edition for the
Employer to act in this way, so this provision
remedies a gap.
In the case where the Contractor complies with its
obligations and remedies the work, the Engineer
may ask for a “retest”. This can only refer to an
item whose defects were discovered as a result of a
test. This final paragraph cannot therefore allow
retesting where the process has had to be initiated
as a result of an examination, inspection, or
measurement. However the Engineer would be
entitled to re-initiate the process under Sub-Clause
7.5 – for which there is no automatic cost
entitlement for the Employer - or exercise its rights
under Sub-Clause 7.6.
Remedial Work (7.6)
This Sub-Clause provides an alternative remedy
where the Engineer does not reject the faulty
element. It is similar to the 1999 equivalent but in
addition to the 1999 remedies the Contractor may
now be required to repair or remedy any Plant or
Materials (rather than remove as previously) or any
other work (rather than remove and re-execute as
previously). This changes the character of the
remedy from one for situations where tests etc have
been failed to one which may also be applied where
there is damage to the works. One reason for this
change is that this sub-Clause is now to be activated
under a cross-reference in Sub-Clause 11.1
[Completion of Outstanding Work and Remedying
Defects] which applies during the DNP and thus
also to damage.
Sub-Clause 7.6 now entitles the Contractor to Cost
and time where the cost of remedying the loss or
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damage results from an act by the Employer and
where there is an Exceptional Event under Sub-
Clause 18.4.
The “repair” right overlaps and adopts a slightly
different policy compared with Sub-Clauses 17.1
and 17.2 which impose on the Contractor an
obligation to take full responsibility for the care of
the Works up to completion or termination. Sub-
Clauses 17.1 and 17.2 only apply where the damage
to be remedied arises from a failure to care for the
works. The obligation there is absolute and does
not require a notice except where one of the
excluded events set out in Sub-Clause 17.2 apply.
The list of excluded events there is less
comprehensive in some ways and more in others
than the possible range of Exceptional Events.
Unlike this Sub-Clause, the procedure under Sub-
Clause 17.2 requires a VO in those circumstances
where the loss or damage is the result of an
excluded event and, depending on the valuation
procedure to be applied under Sub-Clause 13.3.1,
the cost to the Employer may be more or less than a
simple Cost plus Profit calculation under this Sub-
Clause.
Where the remedial work is required as a result of
damage to the Works caused by the Employer or
Exceptional Events, Engineers should therefore
consider but be careful about making use of this
power. It is much simpler, but it may be more
costly to the Employer than if they follow the
provisions of Sub-Clauses 17.1 and 17.2. However
the provision will need to be invoked where the
Contractor fails to carry out repair obligations
under Sub-Clause 17.2. That Sub-clause does not
provide a remedy for this situation.
The consequence of the Contractor not carrying out
the work is (in the same terms as under the 1999
edition) that the Employer may do the work itself at
the Contractor’s cost where the fault is that of the
Contractor. Like the 1999 edition there is no
limitation to reasonable cost. A similar right under
2
In contrast to the equivalent provision under the Defects Notification
Period (11.3(a)) there is no requirement that this cost be reasonable.
3
PlantMaterialsAndWorkmanship/GR/2018(1)/7/CLAL
Sub-Clause 11.4(a) [Failure to Remedy Defects]
limits the costs to those reasonable and also states
that the Contractor shall have no responsibility for
the work. This seems to indicate, by contrast that
the Contractor may have responsibility for the
Employer’s work under Sub-Clause 7.6 and there is
doubt as to whether the Employer’s recoverable
costs need be reasonable.
A provision in the 1999 edition which allowed the
Engineer to instruct the Contractor to carry out any
work which was urgently required for safety
reasons has now been limited to a right to instruct
remedial work only. Presumably non-remedial
work urgently required for safety reasons will now
have to be instructed by a Variation (a process
which is not much use in an emergency situation
and which may be difficult to enforce, given the
changes to Clasue 13.).
In a significant shifting of risk from the Contractor
to the Employer, whereas the 1999 edition required
the Contractor to bear the risk of all remedial work
ordered under this Sub-Clause, provision is now
made for it to recover its Cost 2 where the work is
necessary because of some act of the Employer or
Employer’s Personnel or an Exceptional Event.
The provision remains valuable to the Employer.
Aside from its value under this Sub-clause, it may
be a valuable remedy where the Contractor does
not repair damage as required under Sub-Clause
17.1 and 17.2.
Ownership of Plant and Materials (7.7)
The rules on passing of property, which under the
1999 edition applied “to the extent consistent with
the Laws of the Country” now apply “to the extent
consistent with mandatory requirements of the
Laws of the Country”. This clarifies a doubt which
previously existed as to what the position would be
if the Laws of the Country offered an alternative but
non-mandatory solution.
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The previous rules as to when ownership passed
have now been extended to provide that ownership
passes when the Contractor is paid the amount
determined for the Plant and Materials under Sub-
Clause 14.5. As the review of Sub-Clause 4.5
explains this payment will in many cases be
substantially delayed. Further only 80% the
amount determined is included in an IPC (the
balance will only be paid when the Plant or
Materials are incorporated into the Works). Thus,
this extension is not likely to have much effect.

Article Author

George Rosenberg 3

Email: george.rosenberg@corbett.co.uk

3
The contents of this article should not be treated as legal advice. Please
contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

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Clause 8: Commencement, Delays and Suspension
Written by Taner Dedezade 1
The main changes to clause 8 are:
• The enhanced Programme requirements in
Sub-Clause 8.3 [Programme];
• The introduction of an Advance Warning
mechanism in Sub-Clause 8.4 [Advance
Warning];
• In Sub-Clause 8.5 [Extension of Time for
Completion]:
o A major change from the 1999 edition is
that, now, a Sub-Clause 20.2 notice is not
required when applying for an extension of
time stemming from a Variation;
o further definition of exceptionally adverse
climatic conditions in Sub-Clause 8.5;
• The key change to this clause is the inclusion of
a final paragraph which provides that Sub-
Clause 13.3.1 [Variation by Instruction] shall
apply to revised methods including acceleration
methods. This is a major change and appears to
be limited only to the Engineer being able to
instruct acceleration “to reduce delays resulting
from causes listed under Sub-Clause 8.5”.
• The new carve out relating to Sub-Clause 8.8
[Delay Damages]. The first paragraph of Sub-
Clause 8.8 makes it clear that there is a cap on
Delay Damages as stated in the Contract Data.
The last (new) paragraph makes it clear that the
cap will be lifted in the case of fraud, gross
negligence, deliberate default or reckless
misconduct by the Contractor.
Clause 8, in more detail:
1
Taner Dedezade is a Barrister at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at taner.d@corbett.co.uk
1
CommencementDelaysAndSuspension/TD/2018(1)/8/CLAL
8.1 [Commencement of the Works]
The only notable change in this Sub-Clause is that
in the 2017 edition there is a requirement that the
Engineer gives 14 days’ notice to the Contractor
stating the Commencement Date, whereas in the
1999 edition, there is only a 7-day notice period.
8.2 [Time for Completion]
This clause is unchanged save for the omission of
reference to the achieving of the Tests on
Completion (which is dealt with in the new
definition of Sub-Clause 10.1) and so did not need
to be dealt with in Sub-Clause 8.2 of the 2017
edition.
8.3 [Programme]
Whilst readers would be forgiven for initially
thinking that the programming requirements
would be lessened as there is reference to
submitting “an initial programme” in the 2017
edition and a “detailed time programme” in the
1999 edition, the degree of prescription given in the
2017 edition is far greater. The 1999 edition had no
guidance on how detailed the plan should be. The
2017 edition has most notably tried to narrow that
gap by including a new requirement in Sub-Clause
8.3 (g) that “all activities (to the level of detail
specified in the Employer’s Requirements),
logically linked and showing the earlier and later
start and finish dates for each activity, the float (if
any) and the critical path(s)”. There is now even an
invitation for the Employer to specify the
programming software in the Employer’s
Requirements and an electronic copy of the
Programme that needs to be provided.
There is an express provision in the 2017 edition
that removes the ambiguity in the 1999 edition that
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no Programme can now constitute a notice under
Sub-Clause 20.1.
There is a more elaborate mechanism in the 2017
edition requiring Notice to be given when actual
progress differs from the Programme and a 14-day
time period for the Contractor to issue a revised
Programme but no stipulated consequence for a
failure to comply with that time-period. As with the
1999 edition, therefore, there is no periodic update
required of the programme but see Sub-Clause
4.20(a).
There is a new provision in Sub-Clause 8.3(b) of the
2017 edition that requires the Contractor to add
into its programme the dates the Employer is to
give right of access in accordance with the Contract
Data. If there are no dates in the Contract Data
then the Contractor must set out the dates that the
Contractor requires the Employer to give right of
access to and possession of (each part of) the Site.
In Sub-Clause 2.1 it provides that in the absence of
any times set out in the Contract Data, the
Employer shall give the Contractor right of access
to, and possession of, those parts of the Site “within
such times as may be required to enable the
Contractor to proceed in accordance with the
Programme or, if there is no Programme at the
time, the initial programme submitted under Sub-
Clause 8.3”.
Late possession is an Employer Risk Event allowing
the Contractor to claim time and money. It was
often the case with the 1999 edition that Sub-
Clause 2.1 would be enhanced/amended by the
Employer so as to remove the risk that a Contractor
would simply claim time and money as soon as they
found out that they did not have full access from
the outset of the project. Whether this additional
requirement in Sub-Clause 8 was an attempt to
distort the risk allocation in the contract or whether
it will effectively deal with this issue is
questionable, as I expect every Contractor will
simply set out in its programme that they require
all possession from the Commencement Date.
2
CommencementDelaysAndSuspension/TD/2018(1)/8/CLAL
8.4 [Advance Warning]
This new clause requires both parties to give
advance warning to each other of any known or
future events which may adversely affect: the work
of the Contractor’s Personnel; and the performance
of the Works when completed; increase the
Contract Price and/or delay the execution of the
Works or Section (if any). The mechanism then
suggests that, if appropriate, the Engineer invites
the Contractor to put forward a variation proposal
to avoid or minimise the effects of the notified
event. There is no sanction provided in the event of
a failure to comply with this provision. It would
seem that this is an attempt by FIDIC to bring in
the concept of ‘partnering’ into the FIDIC contract
and to get the parties to co-operate with each other
before delay claims start to surface and positions
start to become entrenched. It may be that this
clause could be used in conjunction with Sub-
Clause 21.3 [Avoidance of disputes].
8.5 [Extension of time for Completion]
An important change to this clause is that a Sub-
Clause 20.2 Notice (previously 20.1 notice) is no
longer required if a Contractor is seeking an
extension of time resulting from a Variation.
The five grounds for extension of time remain. Sub-
Clause 8.5 (c) exceptionally adverse climatic
conditions has been enhanced and Employer-
Supplied Materials has been added to
unforeseeable shortages in Sub-Clause 8.5(d).
Concurrent delay has not been addressed in the
clause save to state in the new last paragraph of
Sub-Clause 8.5 that should the parties wish to deal
with it, they should do so in the Special Provisions.
The Guidance section refers to the possibility for
the parties to make reference to the SCL protocol.
See the last paragraph of Sub-Clause 17.2 for an
inconsistent approach. In that clause, there is
reference to apportionment.
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8.6 [Delays caused by Authorities] of Work] provide enhancements but neither are
material.
There is no change to this clause save to include
“private utility entities”.

8.7 [Rate of Progress] Article Author

Taner Dedezade 2
The key change to this clause is the inclusion of a
final paragraph which provides that Sub-Clause
13.3.1 [Variation by Instruction] shall apply to
revised methods including acceleration methods.
This is a major change and appears to be limited
only to the Engineer being able to instruct
acceleration “to reduce delays resulting from
causes listed under Sub-Clause 8.5”. The only other
change is the inclusion of the reference to Sections. Email: taner.d@corbett.co.uk

8.8 [Delay Damages]

The key change to this clause is the inclusion of the

new final paragraph. The first paragraph of Sub-
Clause 8.8 makes it clear that there is a cap on
Delay Damages as stated in the Contract Data. The
last (new) paragraph makes it clear that the cap will
be lifted in the case of fraud, gross negligence,
deliberate default or reckless misconduct by the
Contractor.

8.9 – 8.13

Aside from the change in heading in Sub-Clauses

8.9, 8.10 and 8.11 which now state that these
clauses relate to Employer’s Suspension, there are
no fundamental changes in these clauses. In Sub-
Clause 8.9 [Employer’s Suspension], there is an
additional requirement to state the date and cause
of the suspension. In Sub-Clause 8.10
[Consequences of Employer’s Suspension], whereas
previously, the Contractor was entitled to Cost only,
now there is an entitlement to Cost Plus Profit. In
Sub-Clause 8.11 [Payment for Plant and Materials
after Employer’s Suspension], there are additional
requirements for proving an entitlement for
payment for Plant and Materials. Both Sub-Clauses
8.12 [Prolonged Suspension] and 8.13 [Resumption

2
The contents of this article should not be treated as legal advice. Please
contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

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Clause 9: Tests on Completion
Written by Edward Corbett 1

The Contractor must now prepare a detailed not envisage the valuation of “omitted” work
test programme with timing and resources. which has been performed, albeit defectively.

The Engineer reviews it and the result is a NONO,

deemed or actual, which permits the tests to begin. Article Author
This should help to remove some of the Edward Corbett 2
uncertainties that often can surround tests on
completion.

Clause 9.2 deals with delayed tests, whether the

delays are caused by the Employer or Contractor. If
the tests are “unduly delayed” by the Employer or
Engineer or by a cause for which the Employer is
responsible, it says clause 10.3 “shall apply”.
Email: edward.corbett@corbett.co.uk
This was problematic in 1999 and has not been
fixed. Clause 10.3 provides a threshold of 14 days of
prevention and does not refer to undue delay. A
delay is “undue” presumably if it is not justified; the
issue is the cause rather than the duration of the
delay. So would an unjustified delay of, say, a week
entitle a contractor to the remedies in clause 10.3,
including a Taking-over Certificate? I suppose the
answer is that the clauses need to be read together
and “undue delay” has to be taken to mean 14
continuous or discontinuous days as provided in
clause 10.3.

• Clause 9.2 also provides more procedures

including three Notices. These may prove
beneficial.

• Failure to pass Tests on Completion under

clause 19.4 has been expanded to include
rejection of a Section rather than of the whole
Works. If rejected, the Employer is meant to
recover his money as if the rejected Section had
been omitted under clause 13.3.1. This may
create difficulties as the variations clause does

1
Edward Corbett is a Director at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at edward.corbett@corbett.co.uk
2
The contents of this article should not be treated as legal advice. Please contact the lawyers at Corbett & Co before acting on or relying upon anything stated
in this article.

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Clause 10: Employer’s Taking Over
Written by Andrew Tweeddale 1

The main changes in Clause 10 are the Other changes to note include:
express reference in Sub-Clause 10.1
[Taking Over the Works and Sections] to • “Part” has now become a defined term meaning
the supply of As-Built Records, Operation “a part of the Works or Section (as the case
and Maintenance Manuals and Training as a may be) which is used by the Employer and
requirement of Taking Over. deemed to be taken over under Sub-Clause
10.2.”
• In the 1999 Yellow Book the requirement to
• That when the Taking Over of Part of the Works
provide training and these documents was
occurs the Engineer must immediately issue a
hidden in Sub-Clauses 5.5 to 5.7. This express
Taking-Over Certificate for this Part, which
reference is then coupled with a requirement
identifies the outstanding work to be completed
for the Engineer to issue a Notice of No-
(including Tests on Completion) and/or defects.
objection for the As-Built Records and the
Operation and Maintenance Manuals. • In Sub-Clause 10.3 [Interference with Tests on
Completion], the 14 day period of prevention
There cannot be a deemed Taking Over under
can either be a continuous period or multiple
Sub-Clause 10.1 without these Notices. The
periods which total more than 14 days.
second main change is the addition of the words
in Sub-Clause 10.3 [Interference with Tests on • The referral of a claim for an Engineer’s
Completion], of the failure to carry out any Determination, under Sub-Clause 3.7, has been
“performance test that is not possible due to omitted from Sub-Clause 10.3.
available operating conditions during trial
operation”. • Sub-Clause 10.4 has not been changed; however
the requirement to reinstate all parts of the Site
The unavailability of operating conditions may is now expressly dealt with in Sub-Clause 11.11.
not be due to the fault of the Employer; for
example, there may have been a drought which
resulted in water levels being too low for the
testing of a dam. However, where this occurs Article Author
then, subject to the Contractor issuing a Notice, Andrew Tweeddale 2
there will be a deemed Taking Over of the
Works or Section. Interestingly, because of the
changes in drafting of Sub-Clause 10.1, it
appears that deemed Taking Over occurs even
without the As-Built Records, Operation and
Maintenance Manuals and Training.

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1
Andrew Tweeddale is a Director at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at andrew.tweeddale@corbett.co.uk
2
The contents of this article should not be treated as legal advice. Please contact the lawyers at Corbett & Co before acting on or relying upon anything stated
in this article.

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Clause 11: Defects After Taking Over
Written by George Rosenberg 1
While the general shape of the Clause has
been left unchanged, it has been
substantially elaborated. Many of these
changes do increase its clarity, but some of
the interfaces with other changed Clauses in
the Contract produce outcomes which were
perhaps not intended.
The positives:
• In several Sub-Clauses where the 1999
edition was not specific about the needs for
notices and periods, detailed provisions
have been included.
• There is reference to a DNP for Parts.
• A suspension which is the fault of the
Contractor no longer prevents the extension
of the DNP.
• The consequences of failure to remedy have
been elaborated and, from the Contractor’s
point of view slightly ameliorated.
• There are clearer time limits and there are
provisions to deal with delay or failure to
meet time limits on the Employer’s part.
Change of risk allocation:
• Delay by Employer may entitle the
Contractor to Costs plus Profit
• Liability for loss or damage to Plant is now
limited to 2 years after expiry of DNP
• The Employer is entitled to recover cost of
reinstating and cleaning the Site, if the
Contractor fails to do so.
• The Contractor is for the first time entitled
to compensation where it is denied timely
access to the Site to carry out repairs.
• Suspension of work on erection of Plant or
delay in delivery of materials no longer
1
George Rosenberg is a Consultant at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at george.rosenberg@corbett.co.uk
1
Defects After Taking Over/GR/2018(1)/11/CLAL
gives a right to the Employer to an
extension of the DNP where the fault is that
of the Employer.
The negatives:
• There is a cross reference to Sub-Clause 7.5
[Defects and Rejection] to make it apply
when defects or damage have occurred and
there is a need to remedy. Sub-Clause 7.5 is
not well adapted to this situation
• The allocation of cost when the loss or
damage is not the Contractor’s
responsibility now cross-refers to Clause
13.3.1 [Variation by Instruction] and this
may cause some confusion and raises the
possibility that the previously unrestricted
Employer right during the DNP to have
defects and damage remedied and sort out
the costs consequences later has been
undermined.
• The previous position that the contract
could be terminated and the cost recovered
by the Employer where a part of the Works
could not be used for its intended purpose is
now dealt with as though it were an
omission, but the consequences of this are
(in the light of Sub-Clause 13.3.1) confusing.
• The provisions allowing the Employer to
omit or terminate where the works do not
perform as intended do not clarify what the
intention is. This contrast with the re-
worded definition of Fit for purpose in Sub-
Clause 4.1.
• There are some examples of unclear
drafting which may open the meaning to
dispute.
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Sub-Clause 11.1 [Completion of Outstanding
Works and Remedying of Defects]:
In wording which effectively adopts the same intent
as the 1999 equivalent provision, the Contractor
may be required by the Employer to remedy all
defects or damage occurring during the DNP.
Whereas previously this only referred to the DNP
for the Works or a Section it now sensibly includes
the DNP for a Part.
However, although the language in Sub-Clause 11.1
appears to be unequivocal, a provision in Sub-
Clause 11.2 (see below) may limit this obligation in
a way which did not previously apply.
This Sub-Clause is elaborated by setting out a
procedure when the Employer discovers a defect or
Damage. This requires a joint inspection, a
proposal by the Contractor and then a process for
remedying the defect by cross reference to Sub-
Clause 7.5 [Defects and Rejection]. The 1999
Edition merely required the Employer to notify the
Contractor and later provisions (which have been
largely duplicated in the 2017 edition) then dealt
with the Contractor’s obligations and what would
happen if the Contractor failed to abide by them.
The notification and joint inspection provisions are
useful additions, but the cross-reference to Sub-
Clause 7.5 merely creates confusion.
Sub-Clause 7.5 provides for a proposal to be
Reviewed by the Engineer. It should be noted that
“Review” is a defined term and refers to a
procedure carried out by the Engineer.
Thus, Sub-Clause 7.5 gives powers to the Engineer
(which is of course appropriate where the Works
are still underway) but does not give powers to the
Employer, who is in charge during the DNP.
Presumably the intent is that “Employer” be
substituted for “Engineer” (both in Sub-Clause 7.5
and in the definition of “Review” but this is not
spelled out. The result is therefore, arguably, that
the Sub-Clause 7.5 procedure (despite being cross
referred to) cannot be applied. It would have been
better if Sub-Paragraph 11.1 had said that, for this
purpose “Engineer” should be read as “Employer”
under Sub-Clause 7.5 and “Review” should be read
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Defects After Taking Over/GR/2018(1)/11/CLAL
as review by the Employer. As a result, an
elaboration of procedure which ought to have been
helpful now creates a confusion which was not
previously present.
However even this would not have entirely solved
the problem. the relevant paragraphs of Sub-Clause
7.5 rely for their workings on the power of the
Engineer to instruct (a power which the Contract
gives exclusively to the Engineer (see Sub-Clause
3.5)) under Sub-Clause 7.6 [Remedial Work] and
creates rights for the Contractor to claim
compensation in the case the need for the remedial
work is caused by the Employer or Exceptional
Events. In contrast Sub-Clause 11.2 provides for
such compensation where the cause is “other” than
the list included (all faults of the Contractor).
Thus, the compensation rights under Sub-Clause
7.6 may be more limited than under 11.2. It is not
clear which will apply.
Further under Sub-Clause 7.5, where a Contractor
does not follow an Engineer’s instruction, the
Employer has the right to have the work carried out
at the cost of the Contractor. It is not clear why it is
necessary to cross refer to Sub-Clause 7.5 for this
purpose as later provisions of Clause 11 cover the
same ground.
The paragraphs imported into Sub-Clause 11.1 from
Sub-Clause 7.5 also allow the Engineer, by Notice,
following a proposal from the Contractor to reject
the design, Plant Materials or workmanship and
the paragraph refers back to Sub-Clause 11.4(a).
This allows the Employer to remedy the defects at
the Contractor’s cost. This cross-reference works.
Finally, the Sub-Clause 7.5 power requires the
Contractor to carry out any subsequent re-testing,
whereas Sub-Clause 11.4(a) allows the Employer to
do the re-testing. It may be that the requirement
that the Contractor only carry out the re-testing
where it has done the remedial work but this is not
clear.
In summary the use of the cross-reference to Sub-
Clause 7.5 creates considerable confusion. It would
have been much clearer if, rather than relying on a
remedial provision drafted to deal with a situation
which occurred during the carrying out of the
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Works, Sub-Clause 11.1 had incorporated its own
bespoke procedure. An attempt to avoid confusion
by setting out a more elaborate procedure and, at
the same time, to save words by cross-referencing
has failed.
Sub-Clause 11.2 [Cost of Remedying
Defects]:
The sense of this Sub-Clause generally remains as
before. However, there is one deliberate change
and one which results (again) from ill thought
through cross referencing. As noted above, the
interface between Sub-Clause 7.5 and Sub-Clause
11.1 also raises a doubt as to whether the
circumstances in which the Contractor is required
to bear the cost may have been modified.
The deliberate change is that the final circumstance
under which the Contractor is said to be
responsible for the cost of remedying defects has
been changed from
“failure by the Contractor to comply with any
other obligation.”
to
“failure by the Contractor to comply with any
other obligation under the Contract.”
This potentially reduces the Contractor’s risk.
The accidental change results from the changes to
Sub-Clause 13.3.1 [Variation by Instruction]. The
1999 edition simply cross referred to the variation
procedure to deal with the situation where the
remedial work was not to be carried out at the
Contractor’s cost. Now the cross-reference is to the
Variation instruction procedure. In this case it is a
deeming provision – it is to treated “as if such work
had been instructed by the Engineer.” This is
workable under Sub-Clause 13.3.1. However Sub-
Clause 13.1 limits the power to give a variation
instruction (see commentary on Clause 13) and
some of the new limits are quite likely to impact
here, allowing the Contractor to refuse to carry out
the quasi-variation. For example, the limitation on
the right to instruct Unforeseeable varied work is
very likely to apply. How can a Contractor be
expected to foresee that the Employer will damage
the works during the DNP?
3
Defects After Taking Over/GR/2018(1)/11/CLAL
It may be arguable that the unqualified obligation
under Sub-Clause 11.1(b) to remedy all defects or
damage overrides the right to object to a variation,
but this is by no means clear. Thus, what seems on
the face of it to be an unqualified right for the
Employer to have the Contractor remedy all defects
and damage, may in fact be limited.
The way this cross reference has been worded is in
contrast to Sub-Clause 11.4 (c) which instead of
requiring that Sub-Clause 13.3.1 be applied, states
that it shall be deemed to have been applied and
the consequences of that are to follow. This would
have been a better approach.
Sub-Clause 11.3 [Extension of Defects
Notification Period]:
Whereas the 1999 edition allowed an extension
wherever the defects or damage affected the Works,
the provision has now been critically altered so as
to only allow the Employer an extension where the
defect or damage is the result of one of the acts of
the Contractor listed in Sub-Clause 11.2(a)-(d).
It is also made clear that the extension of a DNP
may not extend more than 2 years beyond the
expiry of the DNP stated in the Contract data.
By reference to Sub-Clause 1.1.27 which defines
DNP, that period is either as stated or 1 year. Thus,
unless a general provision is inserted in the
Contract stating that the DNP for any Part will be
the same as for a Section or the Works, it can be
assumed that the DNP for a Part (which by
definition does not exist at the time the Contract
Data is written) will be 1 year, even if the Works or
Section in which it is included had been agreed to
be longer.
As with the 1999 edition, a period of suspension is
not to have the effect of lengthening the DNP
period. It starts when it would otherwise have
started. However, this has now been qualified so
that a suspension which was the fault of the
Contractor no longer has this effect. The starting
date has also been modified. Whereas previously it
was the date on which the DNP for any particular
Plant or Materials would have expired, now it is the
date on which the DNP for the Works would have
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expired. Thus, Sections and Parts have been
overlooked and a suspension which only applies to
a Part or a Section may no longer fail to extend the
DNP if the Works as a whole have not been
suspended.
Sub-Clause 11.4 [Failure to Remedy
Defects]:
This Sub-Clause provides for what happens if the
Contractor unduly delays remedying any defect or
damage. It has moved in favour of the Contractor
because, under the 1999 edition, it could have been
read to apply whatever the cause of the delay.
A Notice has to be provided by the Employer and
the reasonable time given must now take account of
all relevant circumstances.
The consequence of failing to meet this demand has
now been modified as follows:
1. Where the Employer chooses to accept the
damaged or defective work
(a) If there is any retesting required this will be
carried out by the Employer at the
Contractor’s cost.
(b) The previous right for the Employer to
require the Engineer to agree or determine
a reasonable reduction in the Contract Price
has been replaced by a right under Sub-
Clause 20.2
a. to claim Performance Damages (if
these are included in the Contract).
b. If there are no Performance
Damages to claim for the price to be
reduced. The amount of the
reduction is now said to be “in full
satisfaction of this failure only” and
the amount shall be only “as
appropriate to cover the reduced
value to the Employer as a result of
the failure”.
4
Defects After Taking Over/GR/2018(1)/11/CLAL
2. Where the Employer chooses not to accept
the damaged or defective work.
(a) The Employer may “require the
Engineer to treat any part of the Works
which cannot be used for its intended
purpose(s) under the Contract … as an
omission as if such omission had been
instructed under Sub-Clause 13.3.1.”
The reference to “cannot be used for its
intended purpose(s)” is unfortunate. It
will be remembered that this was the
wording of Sub-Clause 4.1 in relation to
fitness for purpose under the 1999
edition and that the 2017 edition now
defines intended purpose by reference
to the Employer’s requirement and
ordinary purposes. This welcome
clarification has, for some reason, not
been incorporated here. The same
problem relates to the alternative
remedy of termination as discussed
below.
This is another cross reference to Sub-
Clause 13.3.1, so one must refer to that
Sub-clause to see what it means. The
provision, in this case does not require a
variation order, but only requires the
Engineer to act as thought there had
been a variation order.
Cross referring to Sub-clause 13.3.1, it
needs to be remembered that an
omission made in order to enable the
Employer to carry out the Works is not
permitted. Thus, the right to apply the
present provision cannot apply where
this is the Employer’s intention. Should
the Employer not intend to remedy the
omission itself, the only element of Sub-
Clause 13.3.1 which expressly deals with
omissions is that relating to the
Contractor’s proposal. As noted in the
commentary on Clause 13, it is not clear
whether the Engineer is obliged to
consider this in setting a valuation. If
the Engineer is so required the
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 Contractor is entitled to some
compensation for the omission which
would be offset against any reduction in
the price.
(b) Alternatively, the Employer may
terminate the Contract as a whole with
immediate effect “if the defect or
damage deprives the Employer of
substantially the whole benefit of the
Works.” The normal termination
procedure under Sub-Clause 15.2 is
bypassed. As with the 1999 edition the
Employer is then entitled to a refund
plus other costs. The new provision
departs significantly from the 1999
edition in that the right to terminate
then applied if a major part of the
Works could not be used and also gave a
right to terminate the Contract in
respect of the part which could not be
used.
Thus as a result of this new combination of
remedies, the Employer’s right to terminate is
limited but a new right to treat part of the Works as
omitted largely fills the gap. In principle this is a
welcome change and introduces an element of
workable flexibility. Unfortunately, the wording of
the omission provision leaves some doubt about
precisely how it is intended to work. It is
particularly unfortunate that no yard-stick for
“intended purpose” or “whole benefit” has been
introduced here.
Sub-Clause 11.5 [Remedying of Defective
Work Off Site]:
The Sub-Clause (like that in the 1999 edition)
allows the Contractor, with the Employer’s consent,
to carry out some remedial work on Plant off-site.
The policy of this Sub-Clause remains unchanged,
with one exception. Without departing from policy,
but in a useful procedural requirement, it
introduces a Notice requirement when the
Contractor wishes to remedy off site.
5
Defects After Taking Over/GR/2018(1)/11/CLAL
The change to policy is that the notice can now be
given if “the Contractor considers” it necessary.
Previously the right was to be judged objectively,
but this seems to give the Contractor more
influence over the decision.
The Notice now required to be given includes
details of what needs to be done, where it will be
done, how it will be transported, proposals for
inspections and testing and how long the process
will take. Although it is likely the Employer would
have asked for all this information anyway before
giving consent, it provides a useful check-list.
Sub-Clause 11.6 [Further Tests after
Remedying Defects]:
While the previous provision required the Engineer
to decide whether any tests needed to be repeated,
this Sub-Clause is now limited to Tests on
Completion and Tests After Completion and now
requires the Contractor to provide a Notice setting
out proposed tests. Thus, there is no reference to
the tests which may be required under Sub-Clause
7.4. This may leave a gap. For example, if there
has been physical damage to a structure which has
been repaired during the DNP, there is unlikely to
be a Test on Completion or Test After Completion
but there might be tests specified elsewhere in the
Contract. The Engineer can either agree or give its
own instructions. These instructions may be for
any tests which demonstrate that the Works comply
with the Contract and may thus fill the gap
mentioned above. However, the Engineer will be
required to give these instructions without the prior
proposal from the Contractor.
There is a default provision allowing the Engineer
to give the instruction if the Contractor fails to
provide the proposal.
Sub-Clause 11.7 [Right of Access After
Taking Over]:
Again, this follows the policy of the 1999 edition but
elaborates with one minor change and one
substantial one and some detailed procedural
requirements.
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The minor change is that the Contractor’s right of
access now extends to 28 days after issue of the
Performance Certificate whereas before it expired
on issue of the PC.
The major change is that the Contractor is now
entitled to claim Cost plus Profit if the Employer
delays access.
The Notice requirements require reasonable
advance notice with details of what is required. The
Employer is entitled to propose a reasonable
alternative date, but is deemed to give consent to
the Contractor’s requested date if it does not
propose an alternative within 7 days.
Sub-Clause 11.8 [Contractor to Search]:
This is again similar to that in the 1999 edition but
with a procedural addition and a remedy for the
Employer if the Contractor fails to meet its
obligation.
Under the 1999 edition the Engineer could
“request” a search for causes of defects. Now the
Engineer “instructs”. This instruction will include a
date which, in the absence of agreement, must be
complied with.
If the Contractor does not carry out the instructed
search the Employer may do so and recover its
reasonable costs.
Sub-Clause 11.9 [Performance Certificate]:
The Performance Certificate is to be issued when
the Contractor has “fulfilled the Contractor’s
obligations” under the Contract. The 1999 edition
equivalent stated the test as “completed his
obligations”. It is not clear what difference the
change in wording means.
The PC now has to be issued not only to the
Contractor and Employer but also to the DAAB.
Whereas, previously, it was only a precondition
that all Contractor’s Documents had been supplied,
it is now also a requirement that the Engineer has
given a Notice of No-objection to the as-built
records.
6
Defects After Taking Over/GR/2018(1)/11/CLAL
There is now a provision deeming that the
Performance Certificate has been issued if the
Engineer has not done so within 28 days after the
DNP is complete and the relevant documents
supplied. The deemed Performance Certificate only
comes into effect after a further 28 days.
Sub-Clause 11.10 [Unfulfilled Obligations]:
Like the equivalent 1999 provision, both parties
remain liable after the issue of the PC for any
unfulfilled obligations. However, this is now
limited to 2 years for Plant after the end of the DNP
for that Plant, unless this is prohibited by law or in
case of fraud, gross negligence, deliberate default or
reckless misconduct.
Presumably the reference to “prohibited by law” is
intended to catch situations where the law provides
for a mandatory period of liability.
Sub-Clause 11.11 [Clearance of Site]:
This Sub-Clause extends the 1999 version by
including an obligation to reinstate and clean. In
view of this extension the Employer is given the
right to recover the cost of reinstatement and
cleaning if the Contractor does not do so.
The right to sell items left on the Site is now limited
to those situations where this is “permitted by the
applicable law”. It is not clear what is meant here.
It would have been clearer to say “not prohibited by
mandatory law”
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 Article Author
George Rosenberg 2

Email: george.rosenberg@corbett.co.uk

2
The contents of this article should not be treated as legal advice. Please
contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

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Clause 12: Tests after Completion
Written by George Rosenberg 1
Clause 12 deals with Tests after Completion.
• It is more common overall for Tests on
Completion to be the final test required rather
than Tests after Completion. However, tests
after completion are commonly required for
process and power contracts. There may, for
example be a requirement for a “reliability” test
during a period of initial functioning.
Sometimes the tests are required to be carried
out in different seasons of the year to test
functioning under different conditions –
whether from weather or load.
• Thus, by definition, the Plant is likely to be
under the control of the Employer by the time
the Tests are to be carried out. The Yellow Book
thus assumes that the tests will be carried out
by the Employer, although the results will
potentially lead to obligations being imposed on
the Contractor.
• There are few changes from the 1999 edition
but these few are significant.
• There is a new obligation for the Employer’s
staff who carry out the test to both competent
and able to carry out the tests properly. This is
significant.
• By the time these tests are carried out, the
relevant element of the Works will have been
completed and operational and obviously any
tests carried out by people who do not meet
these qualifications may be of doubtful value.
This is a serious issue where the Works include
complex Plant, because, at least immediately
after the time of taking over, it is quite possible
that the Employer’s staff (probably those who
will eventually run the Plant) may not be
sufficiently experienced to meet the
1
George Rosenberg is a Consultant at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at
george.rosenberg@corbett.co.uk 2 This appears to be an error as the Notice of no-objection is given by, not to, the Engineer.
1
TestsAfterCompletion/GR/2018(1)/12/CLAL
requirements. If they are not, they may not be
able to operate and thus test it to its required
efficiency and the test results will be
misleading. Indeed, if they are the same people
who have been running the plant for some time,
their lack of competence may have contributed
to any short-fall in performance.
• In the event that the Contractor disagrees with
the results and can identify any lack of
competence on the part of the Employer’s
testing team, it will be able to take issue with
the results of the Tests. Since the competence
of the testing staff is an element of the
requirement for testing, the mere fact that the
Employer’s testing staff do not meet the
standard required ought to be sufficient
argument to say that the Employer is not
entitled to rely on the tests. This is even
without proving that the Plant would, if
properly tested, have met the required
standards.
• A further and sensible new provision requires
that the tests be carried out in accordance with
the Employer’s Requirements and the O&M
Manuals to which the Engineer has given (or
“deemed to have been given” sic 2 ) a Notice of
No-objection under Clause 5.7.
• The tests are (as before) to be carried out in the
presence of the Contractor if the Employer or
the Contractor so requests.
• There is new provision enabling the timing of
Tests after Completion to be provided for in the
ER’s and for the Engineer (previously the
Employer) to provide the Contractor with
notice of the date and a programme for the
timing. Given that the tests are to be carried
out by the Employer, not by the Engineer and
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 the Engineer is not expected to be present, it is
not clear why the Engineer has replaced the
Employer in this provision.
Delayed Tests (12.2)
There are no changes.
Re-testing (12.3)
The previous provision regarding re-testing (12.3)
is now said to be subject to Sub-clause 12.4 [Failure
to Pass Tests after Completion]. Clause 12.4 allows
for the imposition of Performance Damages or for
the Contractor to remedy the non-performance
discovered in the tests. The effect of making 12.3
subject to 12.4 appears to be quite significant as it
now seems to be possible for the Employer to by-
pass the Contractor’s right and obligation under
Sub-Clause 11.1 to remedy defects and simply levy
Performance Damages.
Should the Employer not choose to go straight to a
demand of damages there is another anomaly.
Sub-Clause 12.4 gives the Contractor an option to
remedy defects. The conditions under which an
11.1 remedy has to be carried out are different from
those under 12.4. Under the latter (which is
especially designed to deal with the situation where
the Employer is in occupation and operating) the
Employer is entitled to delay access to
accommodate its operational requirements. There
is no equivalent provision in 11.1
Should remedy be required by the Employer under
Sub-Clause 11.1 [Defects Liability], the 1999
provision allowed either party to request repeated
tests under 12.1 – i.e. as a Test on Completion and
thus carried out by the Employer. The new
provision now provides that the repeated testing
provisions in Clause 11.6 shall apply instead.
Although 11.6 requires tests to be carried out in
accordance with Clause 12, notices are given not by
the Employer, but by the Engineer and are directed
to the Contractor not to the Employer (who will
carry out the tests).
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TestsAfterCompletion/GR/2018(1)/12/CLAL
Failure to Pass Tests after Completion (12.4)
One of the options under the equivalent 1999 Sub-
Clause was for the Contractor to pay any prescribed
non-performance damages. He would then be
released from any obligation to remedy the
discovered shortfall in performance. The redrafted
Sub-Clause gives the Employer the option as to
whether or not to demand this payment. Thus, the
previous escape route for the Contractor to avoid
having to carry out remedial works may be closed
off.
The process for the Employer to seek payment of
the Performance Damages requires a Claim under
Clause 20.2. This is a very significant change from
the previous position because the claim is now
subject to the 28 day condition precedent. Once
the Employer knows the tests have failed he must
make his claim, otherwise he will lose the right to
Performance Damages altogether. As noted above
the provision for re-testing is subject to Clause 12.4
and it seems arguable that the 28 day period for
claiming Performance Damages may start as soon
as the failure to pass the test under 12.3 is
apparent, even if the Employer decides to insist on
a remedy under 11.1. Although (as noted below)
Sub-Clause 12.4 goes on to give the Contractor the
option to seek to remedy any deficiencies, such a
request by the Contractor would not seem to give
the Employer further time to make his claim for
Performance Damages.
Payment of Performance Damages is said to lead to
the result that the works are deemed to have passed
the Tests after Completion.
The second part of Sub-Clause 12.4 is unchanged
from the 1999 edition but it is necessary to discuss
the implications of the change to the first part of
the Sub-Clause. When payment of Performance
Damages was a Contractor option it was logical to
provide (as an alternative) that the Contractor
could proceed to remedy any issues at its own
expense. This is what the second part envisages.
Since the choice of whether or not to claim
Performance Damages is now that of the Employer,
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it is much more difficult to see how the Sub-Clause
works. If the Employer does not claim Performance
Damages (whether accidentally or deliberately), the
Contractor will remain liable under the general
principles of damages for default, to meet the
Employer’s resulting losses. Thus, what was
previously a choice now becomes an obligation and,
unless the Contractor prefers to face a general
damages claim 3 it will be obliged to remedy the
defects.

Article Author
George Rosenberg 4

Email: george.rosenberg@corbett.co.uk

3 4
Since Performance Damages are a liquidated sum it would be possible, The contents of this article should not be treated as legal advice. Please
at least under English law, to argue that they provide a cap on liability for contact the lawyers at Corbett & Co before acting on or relying upon
damages, even though the Employer no longer seeks them. anything stated in this article.

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Clause 13: Variations and Adjustments
Written by George Rosenberg 1
The Power to Vary and its Limitations
While the process of ordering a variation has not
changed dramatically, the 2017 edition
substantially clarifies the limits on (some may say
“additionally limits”) the Engineer’s power to vary.
Under the 1999 and all earlier editions, the power
to vary was expressed in open-ended terms and it
was left to the underlying law to say whether or not
this power was limited. Most legal systems do
recognise that variations cannot depart
significantly from the original scope of the contract.
Under English Law there is probably an implied
term, based on the concept of business efficacy,
that instructions should be reasonable and not
stray ‘outside the Contract’. However, this was not
spelled out and always left room for argument.
In a change which will be welcome to Contractors
they are now given an express right to object when
the varied work was “Unforeseeable having regard
to the scope and nature of the Works described in
the Employer’s Requirements.” This is a provision
that is capable of dramatically changing the concept
of what may be the subject of a Variation under the
contract. “Unforeseeable” is defined in Sub-Clause
1.1.87 as “not reasonably foreseeable by an
experienced contractor by the Base Date”. “Base
Date” is the date 28 days before submission of
tender. Sub-Clause 13.3.1. adds the additional gloss
that regard must be had to the scope and nature of
the Works as described in the Employer’s
Requirements.
While an experienced contractor will assume that
there will be some variations during the course of
the Works, he would have to be possessed of quite
extraordinary foresight to know what each one of
these would be. By definition a variation is likely to
be something which the Employer, advised
(hopefully) by an experienced engineer also did not
1
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1
VariationsAndAdjustments/GR/2018(1)/13/CLAL
foresee. It is thus difficult to see how any variation
at all could fail to be caught by this test.
Two significant limitations now expressed for the
first time allow the Contractor to object where the
variation may adversely affect its ability to meet
health and safety and environmental protection
obligations
The final provision may also have unexpcted
consequences. This is set out in Sub-paragraph
13.1(e) which allows the Contractor to object where
the variation “may adversely affect the
Contractor’s obligation to complete the Works so
that they shall be fit for the purpose(s) for which
they are intended in accordance with Sub-Clause
4.1 [Contractor’s General Obligations].”
Sub-Clause 4.1 imposes on the Contractor the
obligations:
• To execute the Works in accordance with the
Contract. This would normally require
obedience to VO’s, but Sub-Paragrpah 13.1(e)
creates an exception.
• To ensure that “when completed the Works
shall be fit for the purposes for which they are
intended as defined and described in the
Employer’s Requirements”.
The language here is different from that used in the
1999 Edition and, in the context of Variations, this
causes important consequences. The 1999 Edition
required the Works, when completed to be fit for
the purposes “as defined in the Contract”. As a
Variation changed the effect of the Contract, the
fitness for purpose obligation adjusted accordingly.
It can be seen that, under the 2017 edition a
Variation, would have to specifically amend the
Employer’s Requirements if it were intended to
impact the purpose for which the Works are
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intended. In the absence of a change to the
Employer’s Requirements, a change which affects
the ability of the Contractor to achieve the purpose
intended as defined in the Employer’s
Requirements is a ground to refuse to comply with
the Variation instruction.
Thus, where the Engineer is faced with an objection
under ground (e), one way of dealing with it would
be to vary the Employers’ Requirements so that the
Contractor, while carrying out the Variation, can
still comply with them.
Sub-Clause 1.1.33 [Employer’s Requirements]
defines the term and includes the document
included in the Contract and “any additions and
modifications to such documents in accordance
wih the Contract.”
However Sub-Clause 3.2 prevents the Engineer
from amending the Contract or “to relieve either
Party of any duty, obligation or responsibility
under or in connection with the Contract.”
There is thus a question as to whether a Variation
can override Sub-Clause 3.2 by empowering the
Engineer to vary the Employer’s Requirements
(which in this case would have the effect of
relieving the Contractor of one of its obligations
under the Contract.)
There is nothing in Sub-Clause 13 which says this
and it therefore has to be assumed that the
Engineer cannot amend the Employer’s
Requirements.
In order to overcome this difficulty, the Employer
will need to attempt to reach agreement with the
Contractor and enter a supplemental agreement.
This puts great bargaining power into the
Contractor's hands and may mean in practice that a
variation which may require a change to the
Employer’s Requirements is not possible.
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VariationsAndAdjustments/GR/2018(1)/13/CLAL
Objections by the Contractor
There is also a new and clarified procedure for
objection by the Contractor. Unusually for the 2017
edition there are no clear time limits for this
process. The Contractor must give notice
“promptly” and the Engineer must also respond
“promptly”.
Some of the value for the Contractor is taken out of
the provision as the Engineer is given the option to
cancel confirm or vary the instruction which will
then be treated as a Variation, even if it in fact
continues to exceed the Engineer’s powers.
If the Engineer chooses to cancel, there is clearly no
problem. If he chooses to vary and the Contractor
still finds there is an objection, there seems to be no
reason why the Contractor cannot again give notice.
However, if the Engineer chooses to confirm the
instruction, this effectively means that it is rejecting
the Contractor’s assertions. There will thus be a
dispute between the parties as to whether or not the
Contractor’s complaint is valid.
As the right to refuse is an absolute one, a brave
Contractor might continue to refuse to perform the
Variation. The safer course will be to continue and
carry out the Variation instruction. In those
circumstances the Contractor will certainly have
put the Engineer on notice that the Variation is
likely to be costly and/or cause significant delay or
that the adequacy of the final product will be
adversely affected unless the Contractor makes
other changes in order to achieve safety, its
guarantees or fitness for purpose obligations, for
the Cost of which it intends to claim.
The additional cost may arguably be included as
part of the valuation of the Variation (see below) or
may only be claimable on the basis of an allegation
that the Engineer has exceeded his authority. It is
particularly important for the Contractor to take
care in these circumstances. As will be seen below,
the valuation of a Variation takes place without the
need for the Contractor to give a notice under
Clause 20.2. However, a claim for breach of
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contract does require a Clause 20.2 Notice. Thus, if
a Contractor has given notice and the Engineer has
confirmed the instruction, the Contractor should
immediately give notice under Clause 20.2
(repeating what it has said in its notice under the
present Sub-Clause and adding any additional
relevant information) so as to set the basis for a
claim for additional payment and an extension of
time if the Engineer later declines or fails to include
the additional costs in its valuation of the VO.
Variation as an Instruction
There is a linkage with Sub-Clause 3.5 [Engineer’s
Instructions]. This is because a Variation is one
form of instruction. 3.5 now contains a welcome
clarification (in this case probably more welcome to
the Employer than to the Contractor) of what the
Contractor may do if he considers an instruction
which the Engineer does not call a Variation in fact
amounts to a variation. In that case he must,
immediately and before commencing work, give
notice to the Engineer and the Engineer has 7 days
to confirm, reverse or vary the instruction.
The requirement of “before commencing work”
may be hard to comply with in practice, particularly
in the common situation where a co-operative
Contractor begins work on an urgent Variation on
the basis of a promise by the Engineer that a formal
VO will follow. As with Cause 13.1, it is not clear
what is to happen if the Engineer confirms an
instruction as not being a Variation when it should
have been a Variation.
Where an instruction is not stated to be a Variation,
Clause 3.5 also adds additional rights to objection
to those in Clause 13.1 – the Contractor can object
on the basis that the instruction does not comply
with applicable Laws or is technically impossible.
Quite why these grounds of objection are not
applied to Variations also is unclear. There will be
some interesting arguments to come on the
consequence of this omission from the limits on the
power to vary.
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VariationsAndAdjustments/GR/2018(1)/13/CLAL
The Process of Variation
The 1999 edition provided that VO’s could be
commenced by either a direct instruction or by a
request for proposal followed by instruction. The
2017 edition follows the same model.
Valuation of Variations
Following an instruction to vary, the Contractor is
required to provide details of his planned reosurces
and emthods, an execution programme and any
need to time extension and its proposal for
adjustment to the Contract Price.
Price Proposal – to be Taken into Account?
The obligation to submit a price proposal is set out
in Sub-Clause 13.3.1(c). This Sub-Clause is one of
the few in the contract which is said by Sub-Clause
1.15(b) to leave open liability on the part of the
Employer for loss of profit, loss of any contract or
any indirect or consequential loss or damage. It
would seem therefore that the Contractor is entitled
to include such losses and damages in its proposal.
This is therefore one way in which a Contractor can
seek compensation for a loss caused to it by an
Unforeseeable variation or by other abuse by the
Engineer of its power to vary. However, the right
goes further than that. As will be seen below the
valuation methods open to the Engineer are very
restrictive and do not, in some instances, allow it to
take into account price increases which may have
occurred since the Tender. Even a legitimate VO
may be costly to the Contractor in ways beyond the
direct cost of the work itself – for example if it
means that it has to use resources which it would
otherwise have been able to deploy more profitably
elsewhere.
If the Engineer is required to take the proposal into
account in making its valuation, this opens the door
some very substantial claims from contractors.
However, the remainder of Sub-Clause 13.3.1 does
not explicitly answer the question as to whether the
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Engineer is required to take account of costs etc
included in the proposal in its eventual evaluation.
The answer as to whether or not the Engineer has
this obligation is perhaps found again in Sub-
Clause 1.15(b). If a proposal does not create a
liability, why would there be a need to exclude it
from the general prohibition on imposing liability
for loss of profit etc.? It appears that the
assumption is that the Employer will be required to
take the proposal into account.
Further support for this position comes from the
fact that Sub-Clause 13.3.1(c) is the only place
where the Contractor’s right to compensation in the
case of an agreed omission is to be found and, if it
were not to be taken into account in the valuation it
would be meaningless.
Method of Valuation
The 1999 edition was notably vague about how the
Engineer was to go about valuing the variation and
this often led to argument. One approach under
the 1999 (and earlier editions) would have been to
assess the value using the tender as a comparator.
Alternatively, the new work could have been valued
on the basis of Cost plus profit. The new edition
sets out two methodologies. One applies where
there is no schedule of rates and prices (not
unusual in a D&B contract) and one where there is.
In the former case valuation is on a Cost plus basis.
In the latter the rates are to be used unless there is
no relevant item, in which Cost plus again applies.
The new valuation methodology where there are no
rates and prices comes as a surprise as it ties the
Engineer’s hands to a method which may
substantially favour one party or the other when
tendered prices would previously have been used as
the basis.
The valuation of the variation is (as before) fixed by
an Engineer’s Determination. This may have what
is probably an unintended consequence when Cost
plus has to be applied. Under the new time limits
set out in Sub-clause 3.7 [Engineer’s
Determinations] the Engineer has a maximum 84
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VariationsAndAdjustments/GR/2018(1)/13/CLAL
days to give his determination. However, these 84
days may have expired before the Cost plus
information necessary to make the determination is
available.
The Engineer may be faced with the impossible
dilemma of whether to issue a determination
without the necessary information or to fail to
make a determination at all. In either case the
issue may then become a dispute to be referred to
the DAAB. It is not clear whether the DAAB has the
power to take into account the Cost information
which may have finally become available before it,
in turn, is obliged to reach a decision. Indeed, in
the case of a major Variation it is quite possible that
the DAAB itself will not have enough information
even assuming it can take into account the
information which has become available in the
meantime. The same problem continues into the
arbitration process.
These problems can be resolved by the Engineer by
demands for further information before a decision
is given or by agreement of the parties to extend the
time limits for determination. Time only starts to
run once all requested information has been
received from the Contractor (a real incentive for
the Contractor to respond promptly). However,
Engineers will need to be very alert to the need to
demand full particulars of actual costs so as to
avoid time starting to run for their determinations.
The Engineer is obliged to assess a provisional rate
for interim payments pending agreement or
determination. This is a new provision which is
welcome and at least ensures that the Contractor
will receive some of his entitlement.
In this situation, there is one specifically relevant
consequence of the new-found “neutrality” of the
Engineer in reaching determinations. Unlike the
situation under the 1999 and previous editions, the
valuation is no longer made by the Engineer acting
as agent of the Employer. Thus, for the first time,
the Employer has equivalent rights to the
Contractor to challenge a valuation of a variation
made by the Engineer.
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There is a provision of Clause 14 which might have
been better placed in Clause 13 and of which
Engineers need to be aware. Clause 14.15(b)
provides that where a variation is valued the
amount to be paid in different currencies must be
specified and this must be done by reference to the
expected currency proportions of the Cost of the
varied work. This is a sensible provision in
principle but assumes that valuation can be done
before the actual work has been carried out and
that all Variations are valued on Cost (which, as
noted above, they are not).
Notices
There is now no requirement for the Contractor to
give notice under Clause 20.2 if it wishes to seek an
extension of time consequent on a Variation. This
has always been the case for valuations but is now
expressly stated for time as well. It should be
noted, however, that this exemption from the
requirement to give notice does not apply to the
other provisions of Clause 13 (Provisional Sums,
Daywork, Adjustments for Changes in Laws).
Under these latter provisions it may be arguable
that the Contractor is obliged to give notice, even in
order to get its entitlement for cost adjustments. It
is certainly required for applications for extensions
of time. A trap for the unwary Contractor who may
be lulled into a false sense of security by the lack of
a need for such notice for Variations proper.
Prolongation and Disruption arising from
Variations
As with the 1999 edition there is no provision for
compensation for prolongation or disruption costs
arising from variations. It remains the case
therefore that it is very arguable that in the absence
of specific provision, these costs will not be
compensable. Indeed, if there was any room for
argument under the earlier edition, this is now
removed by the prescriptive provisions about the
way in which variations are to be valued.
Omissions
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VariationsAndAdjustments/GR/2018(1)/13/CLAL
As with the 1999 edition the Engineer is not
permitted to use a Variation Order to omit work
which is to be carried out by others. The new
edition clarifies this by making it impermissible for
work to be omitted where the intention is for the
Employer himself to carry out the same work.
There is now express provision for the parties to
agree on the omission of work. In these
circumstances the Contractor is entitled to propose
an amount of compensation for loss of profit or
other compensation for the omission. There is
some doubt as to what will happen if the Contractor
fails to include such a proposal. Indeed, there is no
direction to the Engineer to consider this element
of the proposal. Rather unfortunately, where there
is no agreement on the omission there is no express
right to propose such an amount. However, an
omission in order to carry out the works by
someone else would be a deliberate breach of
contract and under Sub-Clause 1.15 is excluded
from the general prohibition on claims for loss of
profit and indirect or consequential loss.
Variation by Request for Proposal
The 1999 edition gives the Engineer the option to
ask for a proposal prior to instructing a variation.
The new procedure is spelt out more clearly but
does not change the process significantly. As before
there is no general provision for compensation for
the Contractor to be compensated for the (possibly
considerable) cost of preparing a proposal.
However, there is now an exception to this in the
situation where the Engineer does not give consent
to a proposal. Contractors should note that, unlike
the right to evaluation of payment, this right is not
exempt from the requirement for a Sub-Clause 20.2
Notice.
Value Engineering
Value engineering under the Yellow and Silver
Books was thankless under the 1999 forms.
Under the Red Book, the Contractor could earn
50% of the net benefit. Here all the forms leave it to
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the Special Provisions to set out any sharing of “the
benefit, costs and/or delay”. However even where
these are set out the Engineer is not obliged to take
them into account, only to “include consideration”
of them when he issues a Variation. This is very
vague language. If the Engineer’s “consideration”
leads it not to include any sharing in its ultimate
valuation there seems to be no basis for a change
either through the Sub-Clause 3.7 procedure or
through a DAAB.
Provisional Sums
There is new provision allowing the Engineer to
require the Contractor to produce quotations from
suppliers.
Daywork
The process for dealing with quotations is usefully
spelled out in more detail.
Daywork is described in the sub clause as a
Variation and the cost consequences (though not
time) in cases of disagreement are, for the first
time, to be determined under Clause 3.7.
Whereas the Contractor is entitled to have the value
and time consequences of other variations
determined under Clause 3.7 without the
requirement for a notice under Clause 20.2, there is
no such exception in the case of Dayworks.
Contractors are going to have to be very careful to
ensure that they adapt to the new procedure by
giving Clause 20.2 notices whenever they need to
have dayworks valued and/or require an extension
of time.
Sensibly (and in contrast to the procedure for other
Variations), time for the Clause 3.7 determination
starts to run from when any disputed dayworks are
completed and their value can easily be
determined. However, there is no special
provision dealing with the start of the 28-day
period for giving Notice under Clause 20.2. The
effect appears to be that the Engineer’s time for
considering any disputed valuations will be
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VariationsAndAdjustments/GR/2018(1)/13/CLAL
truncated by the time the Contractor takes to issue
his Clause 20.2 Notice. In the case of applications
for extensions of time, time may start at a different
point, so the Engineer’s time limits may expire on
different days.
Adjustments for Changes in Law
• As under the 1999 edition, the Contractor may
be entitled to compensation in money or time
for the consequences of changes in law.
• The scope of what may be considered Changes
in Law is expanded beyond what was included
in the 1999 Edition and now includes:
- The Laws of the Country
- Not only judicial or government
interpretation of such Laws but also their
implementation.
- Permits, permissions, licenses or approval
obtained by the Employer or the Contractor.
These are not limited to those of the
Country.
• The last of these may be the most significant as
it will extend to planning and environmental
requirements and may potentially apply to
matters arising outside the Country. In
addition, in an international project, the
Contractor is as likely to be affected in another
country as in the country where the Works are
actually being performed – much of the
manufacture may be taking place off-shore and
materials and labour may well be being
procured elsewhere and may be affected by
regulatory requirements off-shore. The
application of this provision to such permits
licenses or approvals thus represents a
potentially significant change to the balance of
risk.
• It should be noted that permits obtained by the
Employer are at the expense of the Contractor
(Clause 1.13(b)). Thus the Contractor will need
to be vigilant to check whether a permit may be
the result of a change of law and the cost thus
reimbursable.
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• In contrast to the 1999 edition, the Employer is
Article Author
now given the right (subject to a Clause 20.2
Notice) to recover any benefit which the George Rosenberg 2
Contractor may have received as a result of any
changes in Laws.

• Unlike in the case of Variations, there is no

waiver of the requirement to give Notice under
Clause 20.2 when seeking time or money
compensation.

• Finally, there is a new provision which enables

either the Contractor or the Engineer to trigger Email: george.rosenberg@corbett.co.uk
a Variation where a change in Laws requires an
adjustment to the execution of the Works.
There is no fixed time limit for giving such
notice. The term used is “promptly”, but the
starting point for such “prompt” notice may be
subject to some controversy. Nothing is said
about what happens if a party fails to trigger
such a Variation and it may well be that the
general right for the Contractor to be
compensated in Cost and time for such changes
will mean that (subject to timely notices) the
Contractor will be entitled to compensation
even if it does not trigger a Variation.

Adjustment for Changes in Cost

The 1999 edition included detailed methodology for

the calculation of such changes. This is now
omitted, and the parties are expected to include
their methodology in a schedule to the Contract
(without which the right to adjustment will not
apply).

2
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contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

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Clause 14: Contract Price and Payment
Written by George Rosenberg 1
This important clause sets out the method of
payment, certificates and release from
liability.
The overall methodology has not changed but there
are several procedural adjustments and some
inconsequential tidying. Some of the procedural
changes will be welcomed by Contractors but
several will entail further delay in payment to the
Contractor. There is a determined effort to ensure
that all claims are dealt with during the contract
period or very shortly thereafter.
Advance Payment Guarantee (14.2)
There is a new sub-clause specifically dealing with
advance payment guarantees. The most significant
change (a very useful one for the Employer) is that
where a guarantee has to be extended and the
Contractor fails to do so, the Employer may call it
in to the extent that any part of the advance
payment has not been repaid.
The Advance Payment is to be made within 35 days
of the Contractor’s providing his application
together with the Performance Guarantee and
Advance Payment Guarantee. This contrasts with
42 days under the 1999 edition.
Interim Payments (14.3)
The 1999 edition referred to applications for
interim payment certificates. This terminology is
now gone. Now there is a Statement which is then
followed by the IPC. (the term “IPC” is used
throughout).
The statement was formerly required in 6 paper
copies. Only 1 hard “original” is now required,
coupled with an electronic copy.
There then follows a list of the items which have to
be included in the Statement. These have been
expanded to include Provisional Sums, any release
1
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1
ContractPriceAndPayment/GR/2018(1)/14/CLAL
of Retention Money and the amount which the
Employer is entitled to be paid for use of
Temporary Utilities.
Presumably because Sub-Clause 21.4.3 requires
that any money awarded by a DAAB shall be paid
without the requirement for any certification or
Notice, there is (in contrast to the 1999 Edition) no
specific reference to such amounts in the list of
items which are to be included in the Statement.
Nonetheless, Contractors should include such
amounts as this will bring into effect the right to
interest under Sub-Clause 14.8, running from the
date of the decision. There is no provision for
payment of interest unless a DAAB award is
included in this way.
A new requirement has been added to the detail
that the Contractor is required to provide. This
stated as “sufficient detail for the Engineer to
investigate these amounts”. While this is obviously
a useful and sensible requirement it has significant
implications.
For the first time an element of subjectivity is
included in the requirements. It is quite possible
that the Engineer and the Contractor will disagree
about what is “sufficient” or what the Engineer
needs to investigate any amounts claimed.
Should there be such a disagreement and the
Engineer demands additional information, the time
for payment under Sub-Clause 14.7 does not start
to run until the relevant information has been
received (there will, arguably, be a short-fall in the
supporting documents). Not only may the
Contractor be paid later than it would otherwise be
entitled, but it will also be limited in any claim for
financing charges under sub clause 14.8.
Unfortunately, it is not uncommon for Engineers to
be slow in issuing IPC’s, especially when the
Employer is having payment difficulties.
The Contractor would be very unwise not to comply
with any demands for additional information, even
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if it considers the demands unreasonable, but, even
then, there may be a consequent delay in payment.
It will be difficult for the Contractor to do anything
which will speed payment in these circumstances (a
Notice under Sub-Clause 16.1 would be a drastic
but possible remedy) but it will have the basis of a
claim for Financing Charges. To gain these it will
need to initiate a dispute under Sub-Clause 20.2 –
a time-limited right so notice needs to be given
within 28 days of the Engineer wrongly refusing to
accept additional information as sufficient for it to
investigate.
However, it should be noted that Sub-Clause 14.6.2
requires the Engineer to issue an IPC even in the
absence of such information, but making a suitable
deduction to reflect his concerns. (See also the
discussion under 14.7)
Schedule of Payments (14.4)
Under the 1999 edition, the Engineer was entitled
to revise a payment schedule only if progress was
less than expected. Now he may amend it if it
“differs”. This opens the way to bringing payments
forward if the Contractor is making better than
expected progress. Unfortunately, there is no
provision for the Contractor to trigger this
correction process. However, the trigger date for
the purposes of the Engineer’s Sub-Clause 3.7
process is when the difference is first “found by the
Engineer”. Presumably the Contractor can tell the
Engineer and thus makes sure he/she “finds” it.
Under Sub-Cause 3.7. however, the time allowed to
the Engineer to make its decision is 42 days and the
decision only starts the payment process, so it may
be up to 70 days before a change takes effect.
Where the Engineer decides to invoke the process
(most likely when progress is slower than that on
which it considers the Schedule of Payments was
based) the Contractor at least has the advantage
that it is entitled to be consulted and that the
Engineer must act neutrally and fairly.
There will be a question of how the Engineer can
determine that progress differs from that on which
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ContractPriceAndPayment/GR/2018(1)/14/CLAL
the Schedule of Payments was based. If the
Schedule simply provides for fixed payments on a
monthly basis there will be the possibility of a
dispute as to what progress was assumed in the
Schedule of Payments. The Contractor’s principal
obligation is to complete on time, not necessarily to
conform to the programme and it is arguable that if
it decides to change the way in which it will achieve
timely completion this does not mean that the
agreed schedule of payments is inappropriate.
Where there is a Schedule of Payments, payments
for Plant and Materials intended for the Works (see
next Sub-Clause 14.5) is disapplied. There is no
equivalent provision in the 2017 Silver Book and it
is difficult to see how Sub-Clause 14.5 can work in
this situation.
Plant and Materials Intended for the Works
(14.5)
Like the 1999 edition, the 2017 edition allows the
parties to agree that Plant and Materials may be
paid for when shipped or delivered. The Contractor
simply provides the evidence in his application for
payment and the amount should then eventually be
included in the IPC. Under the 1999 edition the
word “determination” was used without cross
reference to the (then) Clause 3.5. Once that
determination was made the amount could be
included. Presumably in the interests of
clarification the Clause now refers to Clause 3.7
Determination.
This has the consequence that the Engineer has up
to 84 days to make a decision which previously
would have been made immediately and it will no
longer be possible to include the amount in the next
IPC. Even then there will be another 56 days delay
before payment. In addition, the amount to be
included in the IPC is only 80% of the value of the
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items. 2 It is thus probable that by the time the
application is dealt with under Clause 3.7 the items
will have been installed so this causes further cash-
flow issues. The provision was intended to give the
Contractor some early payment but as amended it
achieves the opposite.
In a sensible and practical change, the requirement
for a bank guarantee before the Engineer proceeds
to determine a payment has been replaced with a
promise of a guarantee, but with eventual payment
being conditional on the guarantee being provided.
Note that (even if the parties have agreed to apply
this provision) Sub-Clause 14.4 excludes its
operation when payment is made against a
Schedule of Payments rather than against
measured interim payments.
Issue of IPC (14.6)
The Clause now provides, as a condition precedent,
that the Contractor has appointed the Contractor’s
Representative.
Content of IPC (14.6.1)
The Contractor is now entitled to a copy of each IPC
and it is specified that the Engineer must explain
any differences between the amount applied for
and the amount Certified. Contractors will be very
pleased to have an entitlement to this information.
It is interesting to note that the requirement for the
Engineer remains to issue the FPC for such amount
as he “fairly” considers due, so that while Sub-
Clause 3.7 has moved from “fair” to “neutral”, the
halfway house of fairness remains in place here.
(Clause 14.13 includes the same requirement for
issue of the FPC).
Withholding (amounts in) an IPC
2
Note that under Sub-Clause 7.7 property in Materials and Plant does not
pass until they are fully paid for, so this 80% provision means that the
Contractor retains ownership far longer than one might expect.
3
ContractPriceAndPayment/GR/2018(1)/14/CLAL
A further welcome addition from the point of view
of Contractors is that the Engineer is now obliged
to explain why amounts are withheld.
Where Engineers find significant errors or
discrepancies in the Statement they now have a
right to adjust the amount certified to take account
of the extent to which this has prejudiced or
prevented a proper investigation. This does not
amount to a licence simply not to include amounts
in respect of items where there may have been such
an error. All the Engineer is entitled to do is “take
account” of the error. This must be something
other than simply failing to consider material which
contains errors. Presumably this is not intended to
detract from the obligation to act fairly, but exactly
what it will mean in practice remains to be seen.
The IPC also includes any amounts determined
under Sub-Clause 3.7. Although there is no specific
statement to this effect here, this provision in fact
reflects another considerable improvement from
the Contractor’s point of view. Virtually all
employer claims now pass through the Sub-Clause
3.7 procedure, so the situation which prevails under
the 1999 edition where a deduction is sometimes
made for an Employer claim before the Contractor
has the opportunity to argue the point has now
been remedied.
Correction or modification of IPC (14.6.3)
There is a welcome new provision setting out in
detail what the Contractor is entitled to do if he
does not agree with the IPC. Following the
Contractor’s submissions, the Engineer has an
opportunity to include corrections in the IPC. If he
does not do so, or the Contractor still remains
unhappy, he is entitled to entitled to ask the
Engineer to deal with the matter under Sub-Clause
3.7. There is no time-limit on the Contractor
making this request.
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Although the 3.7 process is lengthy in the context of
payment, the clear right for a Contractor to pursue
this procedure in the face of a difficult Engineer will
be welcomed by Contractors.
Payment (14.7)
As before the Employer’s time for payment runs
from when the application is made by the
Contractor. This is 56 days for all IPC’s except the
Final Payment Certificate. Confusingly the Sub-
Clause includes two separate time limits for
payment under IPC’s – 56 days after Engineer
receipt for normal ones and 28 days after Employer
receipt where the IPC is issued as result of a
Partially Agreed Final Statement under Clause
14.13. The FPC is payable 56 days after its receipt
by the Employer.
Delayed Payment (14.8)
As before interest is due on late payment. The rate
is calculated at 3% above variously defined base
rates which have been re-defined. Formerly the
base was the discount rate of the central bank of the
country of currency of payment. It is now based on
the rates charged to borrowers at the place for
payment or, if there is no such rate, the rate in
country of the currency of payment (there should
be some interesting debates about what rate should
be paid where the currency of payment is the
Euro!).
Payment is now to be made without any
requirement for a notice from the contractor of any
sort. There is no time limit expressed and no
provision for interest on late payment of such
interest. Contractors who fear late payment of
interest may be wise to included a claim in their
next Statement for inclusion in an IPC.
Release of Retention Money (14.9)
This new provision marks a considerable negative
change as far as Cotractors are concerned. Under
the 1999 edition payment was certified by the
Engineer outside the normal IPC process and
should have been made immediately. It is now to
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ContractPriceAndPayment/GR/2018(1)/14/CLAL
be included in a Statement for an IPC. This
inevitably means at least a 56 day delay in refund.
Statement at Completion (14.10)
This has always been required to include any
amounts the Contractor considers to be due. The
particular categories are now spelled out in detail –
including claims still being considered by the
Engineer and the DAAB. These are only given as
examples but the list contains considerable gaps –
for example amounts where an NOD is likely to be
issued and amounts which are about to be
challenged in arbitration.
Draft Final Statement, Agreed Final
Statement and Partially Agreed Final
Statement (14.11)
There are now three sub-clauses covering what was
previously in one sub-clause referring to the
application for a Final Payment Certificate. As
before the Sub-clause envisages a process under
which the Engineer and the Contractor attempt to
agree on the figures for the FPC.
The significant change is the introduction of the
concept of a Partially Agreed Final Statement
(PAFS). This is a Statement prepared by the
Contractor identifying amounts which (after
discussions with the Engineer) are agreed and
those which are not agreed. This is a sensible
additional provision to avoid the situation where
there is disagreement over the content of the Final
Statement and the Engineer is forced to make a
decision as to what he includes in the FPC.
As with as Agreed Final Statement, the
consequence of a PAFS is that the Engineer
proceeds to issue an FPC (14.13). However, the
payment consequences are different. In the case of
an FPC, Clause 14.7 requires payment 56 days after
receipt by the Employer. A PAFS does not lead to
an FPC but to an IPC which is to be paid 28 days
after receipt by the Employer.
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Discharge (14.12)
The 1999 edition provided for a full and final
discharge by the Contractor which only took effect
once all outstanding claims had been satisfied.
This has now been limited in that the discharge
covers all agreed amounts but can only exclude
limited elements of the Contractor’s claims.
The excluded items may only be items in respect of
which a DAAB or arbitration is “in progress”. Thus
claims still being dealt with by the Engineer under
Clause 3.7 cannot be excluded, nor can those which,
while still live, have not yet been made the subject
of a DAAB or arbitration (notice not yet given,
proceedings not yet commenced etc). Contractors
ought to be very reluctant to issue such a discharge,
but it is a condition precedent to issue of the Final
Payment Certificate. The discharge will be deemed
to have been submitted and will be effective even if
the Contractor fails to provide it so long as the
amount certified in the Final Payment Certificate
has been paid and the Performance Security
returned. Given that the FPC cannot be issued
until the discharge is provided this provision is
unworkable.
Issue of FPC (14.13)
The FPC is issued 28 days after the Final Statement
or Partially Agreed Final Statement. This is as in
the 1999 edition, but the content of the statement
now includes credit for any amounts paid under the
Performance Security and any balance due from the
Employer.
The Sub-Clause now contains additional wording to
deal with the situation where there is a Partially
Agreed Final Statement (or the Engineer considers
that the draft final Statement submitted is in fact a
Partially Agreed Final Statement).
Unfortunately (perhaps due to a drafting error)
there are two alternative approaches included with
no indication as to which is to apply.
3
Exclusions from Immunity: Gross Negligence and Wilful Misconduct,
James Pickavance and James Bowling SCL October 2017
5
ContractPriceAndPayment/GR/2018(1)/14/CLAL
The opening words provide that following a
Partially Agreed Final Statement a Final Payment
Certificate is to be issued.
However, the final paragraph provides that in the
same case no FPC is to be issued, but there is to be
another IPC. As noted above if this approach is
followed, this IPC (unlike other IPC’s) is to be paid
28 days after receipt by the Employer rather than
56 days after its receipt by the Engineer.
Cessation of Employer’s Liability (14.14)
As in the 1999 edition, the Employer’s liability is
limited by reference to what is included in the Final
Statement, unless something new arises after the
work is completed.
The 2017 edition contains an additional exemption
for the Employer. Unless reference has been made
in the Final Statement or Partially Agreed Final
Statement, the Employer is absolved from any
amounts which the Contractor might wish to claim
unless he makes a claim under 20.2 within 56 days
of receiving the Final Payment Certificate. Under
the 1999 edition no such cut-off was provided.
Contractors will have to be sure to start all their
claims immediately.
As with the 1999 edition the cessation of the
Employer’s liability does not apply in the case of his
indemnification obligations or in case of fraud,
deliberate default or reckless misconduct. To this
list (and to the Contractor’s possible advantage)
“gross negligence” has now been added.
The addition of “gross negligence” may have
substantially different results depending on which
Law applies to the contract.
In a very interesting treatment of the subject
recently presented to the Society for Construction
law in London 3 the authors quoted a passage from
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a Court of Appeal case Armitage v Nurse4 as Article Author
follows:
George Rosenberg 6
“It would be very surprising if our law drew the
line between liability for ordinary negligence and
liability for gross negligence. In this respect
English law differs from civil law systems, for it
has always drawn a sharp distinction between
negligence, however gross, on the one hand and
fraud bad faith and wilful misconduct on the other
... we regard the difference between negligence Email: george.rosenberg@corbett.co.uk
and gross negligence as merely one of degree ...
civil systems draw the line in a different place. The
doctrine is culpa lata dolo aequiparatur [gross
negligence is equal to fraud]; and although the
maxim itself ls not Roman the principle is
classical. There is no room for the maxim in the
common law.” 5
On this basis it seems that in common law
jurisdictions all significant negligence prevents
parties from escaping from liability and under civil
systems only fraud will enable them to escape.

Currencies of Payment (14.15)

This adds two provisions to those in the 1999

edition. One provides for the way in which
currencies are to be allocated in valuing variations
(there is a comment on this in our treatment of
Clause 13). The other deals with the currencies in
which Performance Damages are to be paid.

4 6
[1997] EWCA Civ 1279, [1997] 2 All ER 705, [1997] 3 WLR 1046 The contents of this article should not be treated as legal advice. Please
5
Armitage v Nurse Note 14 [1997] 3 WLR 1046 para [254] contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.]

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Clause 15: Termination by Employer
Written by Victoria Tyson 1
The main changes in Clause 15 are the new
grounds for termination:
• Non-compliance with a final and binding
Engineer’s Determination (Sub-Clause
15.2.1(a)(ii)) and a binding or final and
binding DAAB decision (Sub-Clause
15.2.1(a)(iii)) to the extent that such failure
constitutes a “material breach” of the
Employer’s obligations under the Contract.
• Maxing out the Delay Damages (Sub-Clause
15.2.1(c)). There is no requirement for the
Delay Damages to have been actually
deducted. It is not clear what the position
would be if the Contractor claims an EOT and
it is granted by the DAAB or arbitrator after
termination so that the Delay Damages are
reduced below the cap. Would the
termination then be unlawful?
Notice to Correct
Further important changes concern Sub-Clause 15.1
[Notice to Correct]. Sub-Clause 15.1 is designed to
give the Contractor an opportunity and a right to
correct its previous and identified contractual
failure. Under the FIDIC 1999 edition it was
generally understood that the Engineer would give
a Notice to Correct which specified what was
wrong, how to fix it, and a time within which to fix
it. Most arguments arose as to the specified time to
fix it. The new wording envisages a Notice to
Correct specifying what is wrong, the relevant
contract clause, and a time within which to fix it.
How to fix the problem is now firmly in the
Contractor’s domain. Therefore, most arguments
are likely to arise over the Engineer/Employer’s
objections to what the Contractor proposes to do to
fix the problem in the time.
1
Victoria Tyson is a director at Corbett & Co. International Construction Lawyers Ltd. She can be contacted at victoria.tyson@corbett.co.uk.
2
Obrascon Huarte Lain SA -v- Her Majesty’s Attorney General for Gibraltar [2014] EWHC 1028 (TCC).
3
See, for example, Shawton Engineering Ltd v. DGP International Ltd [2005] EWCA Civ 1359 [69].
1
TerminationByEmployer/VT/2018(1)/15/CLAL
Mr Justice Akenhead’s words in Obrascon Huarte
Lain SA -v- Her Majesty’s Attorney General for
Gibraltar [2014] 2 may have also prompted this
change. Mr Justice Akenhead took the view that
under the FIDIC 1999 the specified time for
compliance within the Notice to Correct must be
reasonable in all the circumstances prevailing at the
time of the notice. He gave the example that if 90%
of the workforce had gone down with cholera at
that time, the period given for compliance would
need reasonably to take that into account, even if
that problem was the Contractor’s risk. He
emphasised that what is reasonable would be fact
sensitive. 3 So, whilst it is logical for the Contractor
to specify what he knows he can do, it is likely that
in practice much time will be spent arguing if it is
good enough.
Non-compliance with a Notice to Correct entitles
the Employer to give Notice of intention to
terminate, provided now that such failure
constitutes a “material breach” of the Contractor’s
obligations under the Contract. (Sub-Clauses
15.2.1(a)(i).) What constitutes a “material breach”
is likely to be the subject of many disputes. So,
while a failure by the Contractor to carry out “any
obligation” under the Contract may lead to a Notice
to Correct, it is the failure to comply with the Notice
to Correct itself, where such non-compliance
constitutes a material breach, which entitles the
Employer to terminate. Logically, it would make no
sense for non-compliance with the Notice to
Correct to be a material breach if the original
breach which gave rise to the Notice to Correct was
not a material breach although this is not spelled
out in the drafting.
This “material breach” wording may have been
prompted in part by Mr Justice Akenhead’s words
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in Obrascon Huarte Lain SA -v- Her Majesty’s
Attorney General for Gibraltar [2014] 4 . In this
case Mr Justice Akenhead took the commercially
sensible view that that Sub-Clause 15.1 of the FIDIC
1999 related only to more than insignificant
contractual failures by the Contractor, such as a
health and safety failure, bad work or serious delay
on aspects of the work. This, he said, would need to
be established as an actual failure to comply with
the Contract rather than something that may have
not yet become a failure. Thus, trivial contractual
failures would not lead to contractual termination.
Mr Justice Akenhead supported his view with
reference to various authorities. 5 He emphasised
that what is trivial and what is significant or serious
will depend on the facts and gave the example that
1 day’s culpable delay on a 730 day contract or 1m²
of defective paintwork out of 10,000m² good
paintwork would not, if reasonable and sensible
commercial persons had anything to do with it,
justify termination even if the Contractor did not
comply with the Sub-Clause 15.1 notice.
Sub-Clause 15.2.2 [Termination] then gives the
Contractor 14 days within which to remedy the
matter(s) described in the Notice of intention to
terminate the Contract under Sub-Clause 15.2.1 6.
Effectively, this gives the Contractor an extra 14
days within which to comply with the Notice to
Correct. After the 14 days have expired the
Employer may then give a second Notice to the
Contractor to immediately terminate the Contract.
Termination for Employer’s Convenience
Another significant change is the Employer’s
entitlement to terminate the Contract under Sub-
Clause 15.5 [Termination for Employer’s
Convenience] in order to execute the Works himself
or to arrange the Works to be executed by another
contractor. The most likely reason the Employer
4 6
Obrascon Huarte Lain SA -v- Her Majesty’s Attorney General for
Gibraltar [2014] EWHC 1028.
5 becomes bankrupt or insolvent etc. under sub-paragraph (g), or engages
Lord Diplock in Antaios Compania Naviera SA v Salen Rederierna AB
[1985] AC 191 at 201D; Hudson’s Building and Engineering Contracts
(Twelfth Edition) at paragraph 8.056; Lord Steyn in Mannai Investment
Co Ltd v Eagle Star Assurance Company Ltd [1997] UKHL 19.
2
TerminationByEmployer/VT/2018(1)/15/CLAL
will have for wishing to terminate for convenience
will be that (i) the market has changed, (ii) it no
longer needs the project, (iii) it has run out of
money, (iv) it has found a cheaper contractor, or (v)
where it does not wish to argue his entitlement to
terminate for cause.
Under Sub-Clause 15.6 [Valuation after
Termination for Employer’s Convenience] the
Contractor must submit detailed supporting
particulars of the value of the work done and the
amount of any “loss of profit or other losses and
damages” suffered by the Contractor as a result of
Sub-Clause 15.5 [Termination for Employer’s
Convenience]. The Engineer must then agree or
determine the amount and then issue a Payment
Certificate for the amount agreed or determined.
The wording “other losses and damages” is vague
and may have different meanings in different
jurisdictions. It is perhaps less vague if read against
Sub-Clause 1.15 [Limitation of Liability] (although
Sub-Clause 1.15 only makes express reference to
Sub-Clause 15.7 [Payment after Termination for
Employer’ Convenience]).
Sub-Clause 15.7 [Payment after Termination for
Employer’s Convenience] is carved out from Sub-
Clause 1.15 [Limitation of Liability] which states
that “neither Party shall be liable to the other
Party for loss of use of any Works, loss of profit,
loss of any contract or for any indirect or
consequential loss or damage…”. Therefore,
liability for “loss of profit or other losses and
damages” is not excluded and there is no overall
limit in respect of this on the Employer’s exposure.
This may make termination for convenience too
expensive to be regularly operated in practice.
The Employer may not execute any part of the
Works or arrange (any part of) the Works to be
executed by any other entities until the Contractor
Except that the Employer may terminate immediately if the Contractor
subcontract or assigns without agreement under sub-paragraph (f),
in corrupt etc. practices under sub-paragraph (h). (Sub-Clause 15.2.2
[Termination].
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has been paid the amount due under Sub-Clause
15.6 [Valuation after Termination for Employer’s
Convenience]. This sum must be paid within 112
days (16 weeks) after the Engineer receives the
Contractor’s submission (Sub-Clause 15.7
[Payment after Termination for Employer’s
Convenience]).
Would the Contractor be entitled to any financing
charges as a result of delayed payment by the
Employer? Financing charges apply only in respect
of a failure to pay under Sub-Clause 14.7
[Payment]. Sub-Clause 14.7 refers to IPCs (an
Interim Payment Certificate defined as one issued
under Sub-Clause 14.6) and FPCs (a Final Payment
Certificate defined as one issued under Sub-Clause
14.13). There is no express reference to a Payment
Certificate issued under Sub-Clause 15.6. Perhaps
the Sub-Clause 15.6 Payment Certificate is intended
to be classed as an IPC or FPC issued under Sub-
Clause 14 by way of its definition? It is not
immediately clear.
Other changes to note include:
• The additional wording in Sub-Clause 1.16
[Contract Termination] which seeks to avoid
arguments in some countries that
termination can only take place with the
approval of the courts. It states, “Subject to
any mandatory requirements under the
governing law of the Contract, termination
of the Contract under any Sub-Clause of
these Conditions shall require no action of
whatsoever kind by either Party other than
as stated in the Sub-Clause”.
• The ground for termination in Sub-Clause
15.2.1(g) [Notice] regarding bankruptcy and
insolvency etc. has been widened. The
wording is identical to that under Sub-Clause
16.2.1(f) [Notice], except in relation to joint
ventures.
• The new unincorporated joint venture
provisions at Sub-Clause 15.2.1(g) [Notice].
3
TerminationByEmployer/VT/2018(1)/15/CLAL
• The ground for termination in Sub-Clause
15.2.1(h) where the Contractor has engaged in
corrupt, fraudulent, collusive or coercive
practice at any time in relation to the Works
or to the Contract. The wording is more
precise than that relating to the granting of
inducements or rewards etc. in the FIDIC
1999 editions. In the FIDIC 1999 editions the
Employer was entitled to terminate if the
Contractor gave or offered an inducement or
reward etc. but there was no recipricol
arrangement. This has been resolved with
identical wording in Sub-Clause 16.2.1(j).
• Clarification that termination requires two
notices, not just one except that the Employer
may terminate immediately if the Contractor
subcontract or assigns without agreement
under sub-paragraph (f), becomes bankrupt
or insolvent etc. under sub-paragraph (g), or
engages in corrupt etc. practices under sub-
paragraph (h). (Sub-Clause 15.2.2
[Termination].)
• Clarification that remedying the default
within 14 days removes the right to
terminate. (Sub-Clause 15.2.2
[Termination].) However, there appears no
way for the Contractor to remedy the event of
reaching the maximum amount of Delay
Damages.
• After termination, the Contractor must
“comply immediately with any reasonable
instruction included in a Notice given by the
Employer under this Sub-Clause (i) for the
assignment of any subcontract, and (ii) the
protection of life or property or for the safety
of the Works”. (Sub-Clause 15.2.3(a) [After
termination].) In the FIDIC 1999 editions
the Contractor was only required to use “his
best efforts to comply with any reasonable
instruction included in the notice”. In the
FIDIC 2017 editions it must do so without
qualification, and must do so immediately.
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 Article Author
Victoria Tyson 7

Email: victoria.tyson@corbett.co.uk

7
The contents of this article should not be treated as legal advice. Please
contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

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4
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Clause 16: Suspension and Termination by Contractor
16: Suspension and Termination by Contractor
Written by Victoria Tyson1
The main changes in Clause 16 are the new
grounds for suspension and termination:
• Non-compliance with a final and binding
Engineer’s Determination and binding or
final and binding DAAB decision, to the
extent that such failure constitutes a
“material breach” of the Employer’s
obligations under the Contract. (Sub-Clauses
16.1(d) and 16.2.1(d)). What constitutes a
“material breach” is likely to be the subject of
many disputes (see the commentary on
Clause 15).
• Non-receipt of a Notice of the
Commencement Date under Sub-Clause 8.1
[Commencement of Works] within 84 days
after receiving the Letter of Acceptance. (Sub-
Clauses 16.2.1(f)). This is development to
ground (h) in the FIDIC Pink (MDB) Book
which states: “the Contractor does not
receive the Engineer’s instructions recording
the agreement of both Parties on the
fulfilment of the conditions for the
Commencement of the Works under Sub-
Clause 8.1 [Commencement of Works]”. It
protects the Contractor from the financial
consequences of fluctuations in the rates and
prices during an extended delay to the start of
the Works.
• Engagement in corrupt, fraudulent, collusive
or coercive practice at any time in relation to
the Works or to the Contract. (Sub-Clauses
16.2.1(j).) This introduces parity between the
Employer and Contractor. The wording is
identical to that under Sub-Clause 15.2.1(h).
In the FIDIC 1999 editions the Employer was
entitled to terminate if the Contractor gave or
1
Victoria Tyson is a director at Corbett & Co. International Construction Lawyers Ltd. She can be contacted at victoria.tyson@corbett.co.uk.
TerminationByContractor/VT/2018(1)/16/CLAL
offered an inducement or reward etc. but
there was no recipricol arrangement.
Other changes to note include:
• The additional wording in Sub-Clause 1.16
[Contract Termination] which seeks to avoid
arguments in some countries that
termination can only take place with
additional formalities such as the approval of
the courts. It states, “Subject to any
mandatory requirements under the
governing law of the Contract, termination
of the Contract under any Sub-Clause of
these Conditions shall require no action of
whatsoever kind by either Party other than
as stated in the Sub-Clause”. It probably
does not apply to the consequences of
termination.
• The ground for termination in Sub-Clause
16.2.1(c) is no longer restricted to the non-
payment of Interim Payment Certificates and
relates to a failure by an Employer to pay the
advance, interim or final payment.
• The ground for termination in Sub-Clause
16.2.1 (e) now requires that a substantial
failure to perform be a “material breach” of
the Employer’s obligations under the
Contract. (Sub-Clauses 16.2.1(e)).
• The ground for termination in Sub-Clause
16.2.1(f) regarding bankruptcy and insolvency
etc. has been widened. The wording is
identical to that under Sub-Clause 15.2.1(g),
except in relation to joint ventures.
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1
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• Sub-Clause 16.4 [Payment after Termination
by Contractor] is carved out from Sub-Clause
Article Author
1.15 [Limitation of Liability] which states that
“neither Party shall be liable to the other Victoria Tyson2
Party for loss of use of any Works, loss of
profit, loss of any contract or for any
indirect or consequential loss or damage…”.
Therefore, liability for “loss of profit or other
losses and damages” is not capped and there
is no overall limit in respect of this. From an
Employer’s point of view, a termination
under Sub-Clause 15.2 [Termination for
Email: victoria.tyson@corbett.co.uk
Contractor’s Default] will be preferable to
termination under Sub-Clause 16.2
[Termination by Contractor].

In the FIDIC 1999 editions, if an Employer

realised the Contractor intended to
terminate, and good grounds existed for the
Contractor to terminate under Sub-Clause
16.2, the Employer may have sought to save
himself considerable expense by terminating
first for convenience under Sub-Clause 15.5
[Employer’s Entitlement to Terminate].

This doubtful strategy is even less attractive

in the FIDIC 2017 editions now that an
Employer who terminates under the new
Sub-Clause 15.5 [Termination for Employer’s
Convenience] is liable to pay the Contractor
for loss of profit or other losses and damages.

Further, under Sub-Clause 15.5 the

Employer’s termination takes effect 28 days
after the date on which the Contractor
receives notice or return of the Performance
Security (whichever is later). Whereas, under
Sub-Clause 16.2 the Contractor may
terminate 14 days after giving notice to the
Employer. So, it is still possible for the
Contractor’s termination to take effect first.

2
The contents of this article should not be treated as legal advice. Please
contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

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TerminationByContractor/VT/2018(1)/16/CLAL 2
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Clause 17: Care of the Works and Indemnities
Written by George Rosenberg 1
This Clause has been substantially re-
worked. The content of the former Clause
17.6 [Limitation of Liability] has been
removed to Clause 1.15.
The Clause 17 Care of the Works obligations under
the 1999 edition were useful as a statement of
allocataion of responsibility, but of limited
significance in that many of the obligations
imposed on the Contractor in respect of its
responsibility for care of the Works and the liability
once responsibility had passed to the Employer
were also capable of being regulated under Sub-
Clause 7.6 [Remedial Work] (prior to completion)
and under Clause 11 [Defects Liability] (after
completion). Despite considerable changes this
position remains.
Where, after completion, the Contractor is
reluctant to meet his responsibilities, the
temptation for the Engineer to use his Clause 11
powers is now increased because, while action by
the Engineer under Clause 17 (formerly on the basis
of a “request”) now has to be through a Variation, a
similar result can be achieved by an instruction
under Clause 11. As can be seen from the
commentary on Clause 13, and also below, the use
of Variations is fraught with potential problems.
The Contractor’s Care of the Works responsibility is
substantially reduced compared with that under the
1999 edition because it does not now include any
loss or damage caused by the Employer or
Engineer.
The Contractor and Employer indemnities relating
to personal injury and property claims, which were
formerly applicable in respect of all relevant claims,
now only apply to third party claims.
1
George Rosenberg is a Consultant at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at george.rosenberg@corbett.co.uk
1
CareOfTheWorksAndIndemnitiesGR/2018(1)/17/CLAL
Responsibility and Liability for the Care of
the Works
The first two Sub-Clauses of Clause 17 deal
respectively with Responsibility for and Liability for
Care of the Works.
The term “care of the Works” is nowhere defined,
but its meaning should be able to be understood
from the two sub-clauses. Under 17.1, the
responsibility entails rectifying any loss or damage
which occurs during the period for which the
Contractor is responsible. Following this period,
the Contractor is liable for any loss or damage
caused by it to the Works – either in this period or
as a result of something which occurred during the
period during which the Contractor was
responsible.
Thus “care of the Works” seems to entail repair
during the period of responsibility (which itself
involves taking the necessary steps to avoid the
need for such repair) and liability for loss or
damage during the period subsequent.
The period during which the Contractor has the
responsibility for the care of the works generally
expires at the Date of Completion or earlier
termination, although it is extended for the care of
any work which is outstanding on the date of
completion until it is completed. This would cover
rectification of defects and snagging lists.
The concept of Date of Completion is clear in
respect of Sections or the Works as a whole thanks
to the definition of Date of Completion in Sub-
Clause 1.1.24. It means that the date will either be
that stated in the TOC, a deemed completion date
under Sub-Clause 10.1 or a deemed taking over date
under Sub-Clause 10.2 and 10.3. The last sentence
of the first paragraph of Sub-Clause 17.1 passes the
responsibility to the Employer if a TOC for a
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Section or a Part is issued or deemed to be issued.
In respect of Parts, Sub-Clause 10.2 does not
provide for the deemed issue of a TOC but does
provide for a deemed taking over and a passing of
responsibility to the Employer. It would have been
helpful if Sub-Clause 17.1 had cross-referred to
Sub-Clause 10.2.
However, Sub-Clause 10.3 deals with interference
with tests on completion and provides that, where
the Contractor is delayed by such interference,
then, subject to the Contractor having given notice,
the Employer shall be deemed to have taken over
the Works or a Section when the Works or Section
would otherwise have been completed. There is
thus a deemed taking-over but no deemed issue of a
TOC. It is clear that such a deemed taking over was
not intended under Sub-Clause 10.3 to be the
equivalent of a deemed TOC as Sub-Clause 10.3(c)
requires the Engineer to issue a TOC. Thus it is
possible that there will be no TOC or deemed TOC
under Sub-Clause 10.3. Unlike Sub-clause 10.2
there is no express provision for passing of
responsibility to the Employer. It is therefore
possible that the passing of responsibility will be
delayed or (in the event that the Engineer does not
issue a TOC) may not occur at all.
It should be noted that the third sentence of the
first paragraph passes responsibility on the date of
issue of the TOC – sometimes a date later than the
Date of Completion, so there appears to be an
internal inconsistency within this first paragraph.
Sub-Clause 17.1 thus has the effect (subject to the
above issues) of defining the period of the
Contractor’s responsibility and the start of the
Employer’s responsibility.
Employer’s Responsibility
Once the Contractor ceases to be responsible for
the care of the Works, responsibility shifts to the
Employer. The Sub-Clause does not explain the
consequences of this, but by analogy with the
consequences of responsibility for the Contractor, it
seems as though it becomes the Employer’s
responsibility to protect against and repair loss or
2
CareOfTheWorksAndIndemnitiesGR/2018(1)/17/CLAL
damage, once it occurs on its watch. The Employer
will probably be ill-equipped for this task
(especially if only a Section or Part has been taken
over). The consequences will be considered below
in relation to the Employer’s remedies set out at the
end of Sub-Clause 17.2
Liability
Sub-Clauses 17.1 and 17.2 draw a boundary between
a period during which the Contractor is responsible
and when it becomes merely liable. This is a
concept many lawyers will find difficult to grasp,
because responsibility usually implies liability.
However, it is clear that this is the draftsman’s
intention. The distinction seems to lie in the scope
of the responsibility laid out in Sub-Clause 17.1 by
comparison with the scope of liability laid out in
Sub-Clause 17.2. Under 17.1 the responsibility
entails repairing loss or damage, whereas under
Sub-Clause 17.2 there is no strict definition. In
general legal terms, liability might mean an
obligation to repair but it would also mean paying
damages consequent.
In making the distinction between responsibility
and liability, Sub-Clauses 17.1 and 17.2 also largely
absolve the Contractor from liability under Sub-
Clause 17.1 (except to the extent that responsibility
for repair can be regarded as a liability).
Quite why it this is necessary to set out a basis of
liability in Clause 17, is not clear. The period of
Contractor liability coincides with the Defects
Notification Period which has a comprehensive
code for Contractor liability.
Sub-Clause 17.2 opens with a paragraph which
imposes liability on the Contractor where it causes
damage after the issue of a TOC, including where
the loss or damage resulted from something which
occurred before the TOC. What it specifically does
not do is impose liability for loss or damage which
occurred before the TOC.
It should be noted that the period of liability begins
with the issue of TOC. According to the definition
of TOC in Sub-Clause 1.1.81 a TOC includes a
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deemed TOC so there may, as outlined above, be
situations where the liability is delayed or does not
come into effect. However, more importantly,
there may be a gap between passing of
responsibility (Date of Completion) and
commencement of liability (TOC). This is because
a TOC is normally dated later than the date of
completion included in it. During this period the
Employer will have responsibility, but the
Contractor will have neither responsibility, nor, at
least under Sub-Clause 17.2, liability2.
Assuming that responsibility is different from
liability, the Contractor will not benefit from the
cap on liability set out in Sub-Clause 1.15, should
the cost of repairs during the period of
responsibility, exceed the limits on liability set out
therein.
Consequences of Liability
If the Contractor is liable, as opposed to
responsible, it is no longer required under Clause
17 to remedy the loss or damage. Sub-Clause 17.2
does not say what is to happen. However, since this
situation occurs after the Completion, Clause 11
[Defects after Taking Over] applies. The
Contractor can be obliged to repair defects or
damage. Sub-Clause 11.2 provides that the
Contractor will bear the cost in a limited range of
circumstances, all of which can be said to be
“caused by the Contractor” but which is certainly
not a comprehensive list of such causes. There may
thus be situations where the Contractor has caused
a loss or damage and is thus liable under Sub-
Clause 17.2, but would not be liable under Sub-
Clause 11.2 for this cost. Presumably the remedy
for the Employer lies in a claim for damages.
It is thus possible that, after TOC, but not before,
the Contractor will be liable for damages resulting
from loss or damage caused by it to the Works.
Such damages will be rather limited as, in
2 3
An act of negligence on the Contractor’s part would
probably create liability in this period, as does the Defects
Notification Period (which begins on Completion) but it is a
pity that there is such a lacuna.
3
CareOfTheWorksAndIndemnitiesGR/2018(1)/17/CLAL
accordance with Sub-Clause 1.15 [Limitation of
Liability] there is no liability “for loss of use of any
Works, loss of profit, loss of any contract or any
other indirect or consequential loss”.
Excluded Events
Sub-Clause 17.2 excludes the Contractor from
liability caused by a list of events. Several of these
are included by reference to Sub-Clause 18.1
[Exceptional Events].
One of the 1999 events has been removed from the
list (pressure waves caused by aircraft or other
aerial devices travelling at supersonic speeds) and
the following have been added:
(a) Interference with any right of way, light, air
water or other easement which is the
unavoidable result of the execution of the
Works in accordance with the Contract.
(b) Faults in the design which an experienced
contractor exercising due care would not have
discovered 3.
(c) Rebellion, terrorism, revolution, insurrection
military or usurped power, riot commotion or
disorder and the encountering of munitions of
war are no longer limited to events within the
country.
(d) Strike or lockout.
(e) Natural Catastrophes such as earthquake,
tsunami, volcanic activity, hurricane or
typhoon.
(f) any act or default of the Employer or Engineer
and use or occupation by the Employer of any
part of the Permanent Works unless otherwise
specified in the Contract.
Such faults also give the Contractor the right under Clause 1.9 to a
Variation, time and money. However the test in 1.9 takes account of cost
and time. It is not clear whether the omission of this qualification in
Clause 17.2 is intended to have any effect on the way the exemption
applies.
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There must be circumstances in which the sort of
intereference referred to in (a) is a result of
Contractor choice – through its design but it would
seem that once the design (prepared by the
Contractor) causes interference when carried out,
the risk shifts to the Employer. It is in any case
difficult to see how such intereference could
influence care of the Works while the Contractor
remains responsible, nor how it relates to damage
to the Works once responsibility has passed to the
Employer.
This list is expressed to extend to Sub-Clause 17.2
liability, but, if the distinction between
responsibility and liability is as effective as is
apparently intended, would not extend to the
period when the Contractor is merely responsible.
This would be a departure from the 1999 edition
philosophy. Perhaps to overcome this problem,
Sub-Clause 17.1 makes the responsibility for care
applicable “except as stated in Sub-Clause 17.2.”.
Although the second paragraph of Sub-Clause 17.2
begins with the words “The Contractor shall have
no liability whatsoever … for loss or damage …
caused by any of the following events ….”, the
subjection of Sub-Clause 17.1 to 17.2 is presumably
intended to mean that in this sentence “liability”
includes “responsibility”, whatever is intended
elsewhere in Clause 17. This conclusion is bolstered
by sub-paragraph 17.2(ii) which is part of a
provision (discussed below) which provides for a
sharing of liability where the loss or damage to the
Works is caused by a combination of one of the
excluded events with “a cause for which the
Contractor is liable”. One of the remedies where
this occurs is EoT. Since, after TOC, EoT is
irrelevant, it seems that here too, “liability” is
intended to mean the same as “responsibility”.
The provisions of Sub-Clause 7.6 [Remedial Work]
also confirm this position. Sub-Clause 7.6 allows
the Engineer, prior to TOC, to order the repair or
remedy works in various situations. The
Contractor does not have to bear the cost where
there is an Exceptional Event, so this sub clause
reflects the same policy as appears to be reflected in
4
CareOfTheWorksAndIndemnitiesGR/2018(1)/17/CLAL
the above conclusions. If excluded events in Sub
clause 17.2 were not to apply during the
Contractor’s period of responsibility there would be
an inconsistency.
However, if the excluded events are to be applied in
full to the period of Contractor responsibility, this
raises questions about the meaning of the words in
Sub-Clause 17.1:
“If any loss or damage occurs to the Works, Goods
or Contractor’s Documents during the period
when the Contractor is responsible for their care
from any cause whatsoever except as stated in
Sub-Clause 17.2 [Liability for the Care of the
Works], the Contractor shall rectify the loss or
damage at the Contractor’s risk and cost, so that
the Works, Goods or Contractor’s Documents (as
the case may be) comply with the Contract.”
If the list of excluded events is taken out and, when
it is noted that the last item in the list is any act or
default of the Employer or Engineer, all that seems
to be left of the Contractor’s responsibility is loss or
damage caused by the Contractor. This happens to
be the same test as for liability under Sub-Clause
17.2. The words “from any cause whatsoever”
appear to have rather limited meaning. They
certainly apply to acts by the Contractor, by third
parties unrelated to the contract and to the less
extreme external events, such as normal climatic
problems, but beyond that the responsibility is
quite limited. The final scope will depend on what
is meant by the incorporation of some of the
Exceptional Events from Sub-Clause 18.1. But,
even then, Sub-Clause 7.6, which, in circumstances
where the Contractor does not spontaneously
repair loss or damage, allows the Engineer to
require it to do so at its cost does not impose the
costs on the Contractor when Exceptional Events
are the cause.
Thus, before Completion, the Contractor’s
responsibility is probably limited to loss or damage
caused by itself, by unrelated third parties and by
non-exceptional climatic events and, after TOC, its
liability is limited to events caused by itself.
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Incorporation of Exceptional Events
Sub-Clause 17.2 includes in the list of excluded
events “any of the events or circumstances listed
under sub-paragraphs (a) to (f) of Sub-Clause 18.1
[Exceptional Events].”
The next paragraph of Sub-Clause 17.2, however,
then goes on to state:
“Subject to Sub-Clause 18.4 [Consequences of an
Exceptional Event], if any of the events described
in sub-paragraphs (a) to (f) above occurs and
results in damage to the Works … the Contractor
shall promptly give a Notice to the Engineer.”
Sub-Clause 18.4 deals with the situation where an
Exceptional Event has caused the Contractor delay
or Cost. Sub-Clause 18.4 is, itself, subject to the
requirements of Sub-Clause 18.2 [Notice of an
Exceptional Event] which requires the Contractor
to give notice where it “is or will be prevented from
performing any obligations under the Contract”.
This is a more limited application of Exceptional
Event than is intended by Sub-Clause 17.2. By
definition those events do not prevent the
Contractor performing its obligations. They may
impose additional cost on it if there are repairs to
be carried out or there is a delay, but that is
different from “prevention”. Perhaps the
subjugation of this paragraph of Sub-Clause 17.2 is
only intended to apply in those very limited
circumstances where the Contractor is entirely
prevented from meeting its obligations. It may be
intended to make it plain that in these
circumstances, there is no alternative required
under Sub-Clause 17.2 of attempting to do the
impossible. It will also be applicable where the
Exceptional Event prevents the Contractor
performing its responsibilities or meeting its
liabilities for a limited period. Contractors will
need to be very careful to meet their notice
obligations under Sub-Clause 18.2 and to not to
rely on Sub-Clause 17.2 for all their Cost and time
recoveries.
When reference is made to Sub-Clause 18.1, it can
be seen the Exceptional Events list in (a) to (f) and
5
CareOfTheWorksAndIndemnitiesGR/2018(1)/17/CLAL
incorporated into Sub-Clause 17.2 by paragraph (e)
is not a comprehensive list of Exceptional Events
but only a series of examples. In Sub-Clause 18.1,
each one is made subject to conditions 18.1(i) to (iv)
– i.e. they must be (i) beyond a Party’s control; ii)
the Party could not reasonably have provided
against before entering into the Contract; (iii)
having arisen, such Party could not reasonably have
avoided or overcome; and (iv) is not substantially
attributable to the other Party. It then goes on to
state:
“An Exceptional Event may comprise but is not
limited to any of the following events or
circumstances provided that conditions (i) to (iv)
are satisfied.”
Thus, one can conclude that the examples (a) to (f)
have to be read subject to (i) to (iv). If that is the
case it is also arguable that 18.1 as a whole was
intended to be imported (which is the case under
Sub-Clause 7.6).
Thus, there are three possibilities:
1. The examples in Sub-Clause 18.1 are included
on a stand-alone basis.
2. They are subject to the pre-conditions in 18.1 (i)
to (iv)
3. The whole of 18.1 is in fact incorporated which
would allow other Exceptional Events to apply.
The third seems unlikely, but possible. It is really
impossible to be sure which of (1) and (2) applies.
Item 17.2(d) sets a standard for an exception for the
operation of forces of nature which is different from
that which would be applied if it were an
Exceptional Event. Unforseeability is dated by
reference to the Base Date (28 days before
submission of tender) whereas the Exceptional
Events test applies at any time up to the entry into
the Contract. This test in this sub-clause is also
different from that in Sub-Clause 8.5 should the
Contractor apply for an extension of time.
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Variation
The 4th paragraph of Sub-Clause 17.2 provides that
if one of the excluded events has, in the
Contractor’s view, been the cause of damage to the
works the Contractor may give a notice to the
Engineer who may then instruct what is to be done.
This will then be treated as a Variation.
This has the odd result that the Contractor will
have a right to object for one or more of the reasons
set out in Sub-Clause 13.1. The first of these is that
“the varied work was Unforeseeable having
regard to the scope and nature of the Works
described in the Employer’s requirements.” Given
that the event will have been one of the excluded
risks, this will often be the case.
This provision only applies in the case of damage –
not loss – in contrast to all other references in the
two Sub-Clauses. It is easy to envisage a loss
situation. For example, material stored on site may
be stolen. The Contractor’s computer server may
be damaged, leading to loss of important data.
There seems to be no remedy in this situation.
The Contractor may not wish to give such a Notice.
If a TOC has been issued and the damage is not
caused by the Contractor it will have neither
responsibility or liability. Event before that, the
effect of the excepted events is to exclude all
responsibility or liability, so it will be entitled to sit
on its hands and do nothing. If it sees a financial
advantage in doing nothing it will be entitled to act
accordingly. Sub-Clause 8.5(c) already entitles the
Contractor to EoT for adverse climatic conditions.
Sub-clause 8.5(e) already entitles the Contractor to
an extension of time where the delay is caused by
the Employer or Engineer. If the Works have been
completed, responsibility will have moved to the
Employer unless the damage is caused by the
Contractor, so 8.5(e) may again apply if the
Employer is not remedying the problems.
If the Contractor does give a Notice and the
Engineer is then required to issue an instruction,
he/she may be faced with a difficult decision. The
damage may be a result of a combination of
6
CareOfTheWorksAndIndemnitiesGR/2018(1)/17/CLAL
Contractor’s responsibility/liability. An instruction
can hardly apportion this. It is not clear how the
Engineer is to cope with this.
It would have been better if either the Contractor or
the Employer could have given the Notice or if the
Engineer was given an entitlement to issue an
instruction with the cost and time consequences to
be sorted out later. This is the position under Sub-
Clause 7.6 which overlaps with Sub-Clauses 17.1
and 17.2 in that there may be need for repair during
the period of responsibility. There will be
circumstances under which the Engineer prefers to
make use of his/her powers under Sub-Clause 7.6
(although it should be noted that the valuation
method under Sub-Clause 7.6 may be less
favourable to the Employer than that under Sub-
Clause 13.3.1 in respect of a Variation). It is also
the case under Sub-Clause 11.1 [Completion of
Outstanding Work and Remedying Defects] where
the Contractor’s obligation is triggered by a Notice.
Where responsibility has shifted to the Employer
(especially where a Section or Part has been taken
over), the Employer may be ill-equipped to repair
any loss or damage not covered by the Contractor’s
liability and may wish to rely on its right to vary
under Sub-Clause 13.1 (which applies at any time
up to the issue of the TOC for the Works as a whole
and will thus apply after a Section or Part is
complete) or its rights under Clause 11 [Defects
after Taking Over]. There may be circumstances
where it prefers to use the Sub-Clause 13.1 power
directly rather than relying on the power in Sub-
Clause 17.2.
Contrast with the 1999 Edition
The equivalent 1999 provision gave the power to
the Engineer to “require” such work to be done.
Once the Contractor had done what it was required
to do, it could claim compensation. The term
“require” sounds rather loose, but it works and
makes sense. The use of the term “instruction”,
though no doubt intended to create clarity, requires
reference to be made back to Sub-Clause 3.5.
Whereas the equivalent in the 1999 edition (3.3)
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allowed an instruction to be given for the execution
of the Works or remedying of defects, the 2017
equivalent is limited to the execution of the Works.
This probably makes no difference if the instruction
is given during the period before TOC, or even
during the snagging period. However, it is clear
from Sub-Clause 11.1 that there is a distinction,
during the DNP, between defects, the remedy of
which would undoubtedly be part of the execution
of the Works and damage, which is not necessarily.
Thus, if there is damage caused by one of the
excluded risks, occurring during the DNP, the
Employer will need to use his powers under Clause
11, rather than under Clause 17. There is room for
confusion when a DNP has started for a Section or
a Part and the whole of the Works is not yet
complete as during this period both the Engineer
and the Employer will have functions running in
parallel. This will be particularly confusing if there
is a suggestion that damage is a result of something
caused by the Contractor prior to TOC.
Shared Liability
The final paragraph of Sub-Clause 17.2 deals with
the possible situation where the loss or damage
results from a combination of the excluded events
and a cause for which the Contractor is liable. As
noted above this seems to be intended to read
“responsible or liable”. The Contractor is then
entitled to a proportion of EoT or Cost to the extent
that the excluded events contributed. This assumes
that the Contractor will rectify the loss or damage
and then make a claim, but, as noted above, it may
not be responsible/liable to rectify any element
arising from the Exceptional Events. The provision
is, however a useful one in that it will encourage the
Contractor to act on its own initiative and attempt
to recover any relevant cost or EoT later. It is a pity
that it does not provide for this remedy even where
the cause is entirely a result of one of the
Exceptional Events.
Indemnities
As discussed below, the majority of the indemnity
provisions have been significantly diminished in
7
CareOfTheWorksAndIndemnitiesGR/2018(1)/17/CLAL
effect, in that they are now limited to situations
where the party claiming the indemnity is being
pursued by a third party. The consequences of this
change are discussed below in the section on
Indemnities by Contractor (17.4) but they apply to
all of Sub-Clause 17.3, 17.4 and 17.5 and have a
consequential impact on Sub-Clause 17.6.
Indemnities by the Contractor and by the Employer
were formerly included together in the 1999
edition. There are now two sub clauses dealing with
them and a third dealing with shared indemnities.
As can be seen from the analysis below the scope of
the indemnities has shrunk substantially and the
Sub-Clauses are not likely to be much utilised.
Indemnities relating to Intellectual and
Industrial Property Rights (17.3)
The Clause is closely based on that in the 1999
edition. However, there are four changes:
• The indemnity only applies to third party
claims and;
• an express inclusion of legal fees and expenses,
and;
• the Contractor is entitled to be indemnified
where his alleged infringement was a result of
his carrying out a Variation and;
• The Contractor is no longer required to
indemnify the Employer where a claim arises
from the proper use of the Works.
Indemnities by the Contractor (17.4)
These indemnities relate to injury to persons and
damage to property other than the Works.
Similar indemnities applied under the 1999 edition.
However, both the Contractor and Employer
indemnities are now limited to “third party” claims
etc.
The intention is presumably to prevent ether party
claiming against the other in respect of injury or
damage caused to their own staff or property. The
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inclusion of the reference to “third party”
represents a considerable change to the contract’s
risk profile. For example, in the case of the
personal injury indemnity, if an employee of the
Employer or the Engineer under the 1999 Edition
was killed in circumstances where he or she was
carrying out duties in relation to the Works, but the
Contractor was not in any way at fault, the
Contractor would nonetheless have been held
responsible. However, that employee is
“Employer’s Personnel”, not a third party, and
therefore the 2017 edition does not make the
Contractor responsible. The only claims now
covered by the indemnity will be those where a
third party is entitled to claim against the
Employer. Under English law this might be the
case where the Employer has responsibility as the
occupier or has strict liability under worker injury
legislation.
In the case of property damage, the indemnity (as
before) only applies to damage of property other
than the Works, but is again limited to third
parties. In this case it is limited to loss attributable
to fault of the Contractor, its Personnel, their
agents and anyone directly or indirectly employed
by them. There may be circumstances where an
Employer has strict liability against a third party
for property damage and will wish to recover it
from the Contractor. If the fault is that of the
Contractor, its personnel or agents, this remains a
useful provision. However, the previous provision
enabled the Employer to claim against the
Contractor for damages it, its Personnel and agents
suffered as a result of the fault of the Contractor,
Contractor’s Personnel and agents. This right now
seems to be excluded. This will not make a great
deal of difference where the fault is that of the
Contractor itself. However, where the fault is that
of a subcontractor or agent, the Employer will now
have to identify the party responsible and pursue
him or her. Where the victim is a member of the
Employer’s Personnel or an agent, they will have to
pursue the claim themselves.
There may be “third parties” who are closely
involved with the Works. For example, in the not-
uncommon situation where the owner of the
structure being built is not the Employer, claims
8
CareOfTheWorksAndIndemnitiesGR/2018(1)/17/CLAL
initiated against the Employer by the owner may be
covered by the indemnity.
It is not clear why this change was necessary.
An error in the equivalent provision in the Gold
Book (where the provisions have considerable
similarity) has been corrected. The word “or” at the
end of Sub-Clause 17.4(b)(i) has been replaced with
“and”.
Indemnities by Employer (17.5)
Again, the indemnity is limited to third party
claims.
The Employer’s indemnity for personal injury only
applies where there has been fault on the part of
the Employer, its Personnel and agents. It does not
apply where the injury is the result of one of the
Employer’s risks.
Under the 1999 edition (in addition to a situation
where it was at fault) the Employer indemnified the
Contractor against personal injury on the basis that
they were difficult or impossible to insure for
injury:
i. resulting from the Employer’s right to have
permanent works executed over under in or
through any land and to occupy this land for
the permanent works,
ii. which is the unavoidable result of the
Contractor’s obligations to execute the
Works and remedy any defects and
iii. resulting from something covered by a
clause listed in Sub-Clause 17.3 [Employer’s
Risks].
None of these indemnifications now apply in
respect of personal injury. (i) and (iii) are excluded
in any event because they are (as they were)
Employer’s risks and a policy decision seems to
have been taken to exclude Employer’s risks from
the Employer’s indemnity. If it is indeed difficult
or impossible to insure these risks, it is difficult to
see why they have been removed from the
Employer’s indemnity.
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The 1999 edition did not include any Employer’s
indemnity for property damage. The new indemnity
for property damage (other than the Works) does
not apply where the Employer has caused the
damage through fault (for which it would be liable
anyway, though not on the basis of indemnity) but
does apply where one the Employer’s risks is the
cause. Thus, where fault is involved the Employer is
absolved from indemnification, but it is liable
where one of the no-fault events caused the claim.
This is again limited to third parties, so would only
apply if such third party had a claim against the
Contractor resulting from one of these events. This
again would only seem to be possible where the
Contractor is under some form of strict liability.
Fitness for Purpose
Clause 17.4 now contains the following Contractor’s
indemnity which needs to be carefully considered.
Unlike the other Contractor indemnities, it does not
only relate to third party claims.
“The Contractor shall also indemnify and
hold harmless the Employer against
all acts, errors or omissions by the
Contractor in carrying out the Contractor’s
design obligations that result in the Works
(or Section or Part or major item of
Plant, if any), when completed, not being
fit for the purpose(s) for which they
are intended under Sub-Clause 4.1
[Contractor’s General Obligations]”.
This (which originated in a slightly narrower form
in the Gold Book) represents a significant change to
the way in which the Contractor’s fitness for
purpose obligation has been treated. On a free-
standing basis, a breach of the fitness for purpose
obligation under 4.1 would normally lead to a
liability based on consequences, rather than cause
and thus whether the Contractor has been negligent
or not in failing to achieve its obligations will be
irrelevant. Its only excuse might be if the failure to
achieve fitness for purpose was caused by an
Employer act.
4
This is a warranty that the completed works will be in
accordance with the documents forming the Contract.
9
CareOfTheWorksAndIndemnitiesGR/2018(1)/17/CLAL
The indemnity is limited to design obligations
which result in the Works not being fit for purpose,
so is much narrower than the fitness for purpose
obligation in Clause 4.1. Further it an indemnity
limited to circumstances where the failure is a
result of acts, errors or omissions on the part of the
Contractor whereas the fitness for purpose
obligation is not so qualified. Thus, unlike the
normal situation in respect of a fitness for purpose
obligation, the burden of proof is shifted to the
Employer to demonstrate that the indemnity
applies because of such acts errors or omissions.
Rather than rely on this rather limited indemnity, it
seems likely that Employers, faced with a product
which is not fit for purpose, will rely on their rights
to claim damages for breach of Clause 4.1 or 5.3 4,
require remedy under Clauses 7.6 [Remedial Work]
and 11 [Defects after Taking Over] and any
Performance Guarantee or make a claim for
damages for breach rather than under the
indemnity. It is therefore very difficult to see what
this fitness for purpose indemnity is intended to
achieve.
When it was included in the draft of the Yellow
Book circulated for comment the draft included an
indemnity similar to the one now included and with
no cap on damages. This drew considerable
adverse comment including from many contractor’s
associations who, in a joint letter stated:
“If the current wording is allowed to stand,
it will impose a major additional risk upon
international contractors and, in the case
of major infrastructure works or plants,
the losses that may be recovered could
easily run into billions of euro and lead to
insolvency, as claims under the indemnity
will be uninsurable”.
Although the language of the originally drafted
indemnity has changed this does not seem in itself
to have made a significant difference. However, the
general limits of liability are now allowed to apply.
Despite the Contractors’ warning the indemnity is
required to be insured.
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Shared Indemnities (17.6)
This is a new provision (developed from that in the
Gold Book) which purports to protect both the
Contractor and the Employer against the full force
of the indemnity obligations imposed. The effect is
very different for the Contractor from that for the
Employer.
Where the claim under one of the indemnities is by
the Employer against the Contractor but one or
more of the events listed in 17.2 (a) to (f) has
contributed to the damage which the Contractor is
required to indemnify the Employer, the liability is
to be reduced proportionately to its effect. Whether
it is necessary to state this is arguable as Sub-
Clause 17.2 already says that the Contractor shall
have no liability by way of indemnity if any of the
Employer’s risks are the cause.
deduction up to Completion or Termination is
100%. It may be less after Completion, but this
seems unlikely as any event likely to lead to the
need for indemnification will most likely arise in
respect of outstanding elements of the Works.
The effect of the Sub-Clause therefore seems to be
to absolve the Employer almost entirely from
responsibility for its personal injury and property
indemnification responsibilities, limited as they
already are.
Article Author
George Rosenberg 5

17.2 (a) to (f) cover every fault of the Employer and

also include the no-fault events which were
formerly called “Employer’s Risks” and are now
“Exceptional Events”. Thus, the indemnity given
by the Contractor will be reduced to the extent one Email: george.rosenberg@corbett.co.uk
of these events applies. This makes sense but the
Sub-Clause is unclear as to whether the exception
to Employer’s liability included in the opening
paragraph to the list (a-f) in Sub-Clause 17.2 is
intended to apply.

The indemnity already covers cases where the

Employer has been negligent, wilful or has
breached the contract.

It is hard to see what is left to apportion.

Where the claim under one of the indemnities is
against the Employer the value of its indemnity is
to be reduced proportionately to the extent that any
event for which the Contractor is responsible under
Sub-Clause 17.1 may have contributed to the loss.
Sub-Clause 17.1 describes the Contractor’s
responsibility up to Completion or Termination as
“full”. This responsibility continues after
Completion in respect of any outstanding work. It
would therefore seem that the “proportionate”

5
The contents of this article should not be treated as legal advice. Please
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Clause 18: Exceptional Events
Written by Edward Corbett 1

“Exceptional Events” has replaced “Force contractor of individual obligations that were
Majeure” and the provision is now clause 18 legally or physically impossible; or only of the
rather than clause 19 but otherwise little has Contract as a whole. It seems clearer that this is an
changed. all-or-nothing clause: if it is invoked, the result is

FIDIC appear to have decided that the term “force

majeure” brought with it too much baggage for Article Author
those using it in civil law jurisdictions. Many users Edward Corbett 2
have pre-conceptions about what force majeure is
and is not and perhaps did not consider what
FIDIC meant by the term. With the new term, users
should approach the provision with a more open
mind.

One result of the change in term is that the word

“exceptional” no longer features in the definition:
Force Majeure meant an exceptional event or Email: edward.corbett@corbett.co.uk
circumstance. Of course, it would seem perverse to
argue that an Exceptional Event did not have to be
exceptional; but it is also true that a defined term
means what it is said to mean, not whatever the
chosen term implies.

One improvement introduced into 18.1 is that

strikes and lockouts have been separated out. As
these might properly be regarded as the most
common form of event that entitle the Contractor
to both time and money, it is right that they are not
buried in the more exotic “riot” item.

The anomaly of having a list of events, all of which

give rise to time and money except for one remains.
The natural catastrophes item is still on the list.
Was there any real doubt that earthquakes,
tsunamis, volcanic activity, hurricanes and
typhoons were force majeure?

Clause 18.6 is Release from Performance under the

Law. The question in relation to the equivalent
clause of the 1999 form was whether it relieved a

1
Edward Corbett is a Director at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at edward.corbett@corbett.co.uk
2
The contents of this article should not be treated as legal advice. Please contact the lawyers at Corbett & Co before acting on or relying upon anything stated
in this article.

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Clause 19: Insurance
Written by Richard Adams 1
The insurance requirements both in Clause
19 and the related tender information in the
Contract Data are now considerably more
prescriptive.
The positive aspect may be that this will lead to a
more careful consideration of what in many
applications is a key aspect of the Contract.
Against that there is a concern that the
requirements here are now too prescriptive and do
not allow more flexibility against the known
potentially wide and varied applications of these
forms. The use of the term “insuring Party” in
Clause 18 of the 1999 edition, allowed for flexibility
in the allocation of insurance obligations as
between the Parties. At the same time those
obligations applied with equal effect, depending on
the Party to which the obligations were assigned.
The new provisions in what is now Clause 19 have
done away with the “insuring Party” approach;
almost all the obligations are on the Contractor. In
applications where that is not to be the intended
position, it will now mean careful amendment to
Clause 19 itself.
Furthermore, the earlier flexible approach also
allowed for the terms of what was then Clause 18 to
be overridden by specific insurance terms agreed
between the Parties before the date of the Letter of
Acceptance. That further flexibility is also now lost,
at least within the new Clause 19. The mechanism
now lies in adding “memoranda” to the Letter of
Acceptance; see the asterisked footnote against the
heading on the form of the Letter of Acceptance,
and which incorrectly refers to Sub-Clause 1.1.51. It
should refer to the defined term of “Letter of
Acceptance” which is at Sub-Clause 1.1.50, and
which does refer to the possibility of including,
“annexed memoranda comprising agreements
1
Richard Adams is a Consultantat Corbett & Co. International Construction Lawyers Ltd. He can be contacted at richard.adams@corbett.co.uk
1
Insurance/RA/2018(1)/19/CLAL
between the Parties”. Hardly the language of
clarity.
There is a concern that even where the Parties
essentially remain within the outline of the Clause
19 terms, many typical insurance policies may well
not match the now much more specific
requirements within Clause 19. What remains to be
seen is whether or not those Parties will correctly
react and go down the memorandum/addendum
route. Failing that, the Clause 19 terms will apply
and the scope for misunderstandings to arise is
very real. It seems a pity that the more fail safe
earlier way of dealing with this has now been lost.
In going to a more prescriptive basis, it is perhaps a
missed opportunity that Clause 19 did not at least
address the insurance requirements and
implications against the possibility of:
• Joint names insurance cover extending to all
parties for their Site interests, particularly
Subcontractors of any tier and other contractors
of the Employer, as may be applicable.
• The Works forming a part of a larger project, all
at or about the Site.
• The presence of significant existing property of
the Employer at or about the Site.
To the extent applicable via the Contract Data, the
new requirements relating to professional
indemnity insurance in Sub-Clause 19.2.3 will
deserve careful review by a tendering Contractor
with his professional insurance advisor. The basis
of the required cover, the absence of the usual
protection where such cover is no longer available
at reasonable market rates, and the requirement to
extend such professional indemnity insurance to
fitness for purpose, are likely to be problematic.
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In summary the more extensive and prescriptive
nature of Clause 19 and the associated Contract
Data is a positive development if the outcome is
that Parties will consider the requirements carefully
and take the necessary professional insurance
advice.

The potential downside is twofold; (i) the

provisions of Clause 19 may well need amending
even where the Parties intend to remain within its
structure, and (ii) the route to ensuring that such
amendment is properly incorporated into any
Contract is now not so clear and lacks the earlier
and more fail safe provision to allow amendments
specifically agreed between the Parties to prevail
over what is now Clause 19.

Article Author
Richard Adams2

Email: richard.adams@corbett.co.uk

2
The contents of this article should not be treated as legal advice. Please
contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

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Clause 20: Employer’s and Contractor’s Claims
Written by Gabriel Mulero Clas 1

The 1999 Clause 20 has now been divided into Notice of Claim Fully detailed
Clauses 20 and 21 whereby Clause 20 refers to Claim
Claims and Clause 21 refers to Disputes and Time As soon as Within 84 days
practicable and after becoming
Arbitration. Another main upgrade is that within 28 days aware (or should
Employer’s Claims now need to follow the same after becoming have become
procedure. The main list of Employer’s and aware (or should aware) of the event
Contractor’s Claims is as follows: have become or circumstance, or
aware) of the event as agreed by the
a. Additional payment; or circumstance. Engineer.
Contents Written A statement of the
b. Reduction in the Contract Price; description of contractual and/or
event or other legal basis of
c. Extension of the DNP; and
circumstance, the Claim.
d. Extension of time. expressly
identified as a
Another main difference is the express distinction Notice.
between the Claims listed above and any other
Claim (Sub-Clause 20.1 (c)). The other Claims still If the Party fails to serve either the Notice of Claim
need to be determined by the Engineer under Sub- or the contractual/legal basis in the fully detailed
Clause 3.7, though they do not need to follow the Claim within the allotted time, the Notice will be
strict requirements of the Claims procedure deemed invalid and the Claim is time-barred. For
explained below. The starting point of the other the time-bar to bite, the Engineer must give Notice
Claims is not the event or circumstance, but the to the claiming Party within 14 days of (a) receiving
disagreement between the parties. The Notice only the Party’s Notice or (b) the lapse of the 84 days for
needs to be given as soon as practicable from this the fully detailed Claim. If the Engineer fails to give
point and contain details of the Party’s case and the either Notice, the Party’s Notice of Claim shall be
disagreement. The Notice is the only requirement deemed valid. Nevertheless, the other Party may, in
for the Engineer to issue its agreement or turn, give a subsequent Notice disagreeing with the
determination under Sub-Clause 3.7. deemed validity, in which case, the Engineer shall
review the issue in its determination. More
On the other hand, the main Claims must follow a importantly, if the Engineer issues its Notice
Claims procedure (Sub-Clause 20.2) consisting of a deeming the Notice of Claim invalid, the claiming
Notice of Claim, a fully detailed Claim, and the Party may include in its fully detailed Claim details
Engineer’s agreement or determination (pursuant of its disagreement or justification of the late
to Sub-Clause 3.7). This has not changed from the submission. Even if a 14-day Notice has been
1999 edition but the details of this procedure have. issued, the Engineer shall nevertheless agree or
More importantly, the content requirements that determine the substance of the Claim pursuant to
carry time-bar implications are rather specific. Sub-Clause 3.7 and include a determination on the
validity of the Notice.
These requirements are:
Therefore, the 2017 edition has added a time-bar
on the fully detailed Claim but has tempered this

1
Gabriel Mulero Clas is a Lawyer at Corbett & Co. International Construction Lawyers Ltd. He can be contacted at gabriel.muleroclas@corbett.co.uk

Tel: + 44 (0)20 8614 6200

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with the opportunity for the claiming Party to
object to the time-bar. The claiming Party can
either argue that the Notice of Claim or the fully
detailed Claim were served within their time limits
or submit a justification for its delay. The Engineer
may consider prejudice to the other Party and prior
knowledge by the other Party. However,
considering that the content requirements for
either the Notice of Claim or the fully detailed
Claim are so simple, it is hard to think of a
justifiable reason why anyone would be late apart
from the usual difficulty of identifying the start of
the period. It will probably be easier to argue that
the Notice was not in fact served late, perhaps by
basing the argument on Mr Justice Akenhead’s
Obrascon judgement.
Also, the Notice does not need reference to the Sub-
Clause on which it is based. However, as mentioned
above, the fully detailed Claim requires a statement
of contractual/legal basis. With such scant content
requirement at each stage, it is arguable that the
fully detailed Claim is little more than a second
Notice of Claim. An Engineer will struggle to reach
a determination of a claim based solely on a light
description of the event or circumstance and the
contractual/legal argument behind it. On most
claims, the Engineer will need more details of the
cause and the effect of the Claim in order to reach a
sensible determination. Therefore, the 2017 edition
may give rise to Parties submitting scant Notices
and Claims followed by requests from the Engineer
for additional particulars.
Furthermore, Sub-Clause 21.6 states that Parties
will not be limited in the arbitration “to the
evidence or arguments previously put before the
DAAB […] or to the reasons for dissatisfaction
given in the Party’s NOD […]” Therefore, it appears
that in the arbitration stage the Parties can change
the contractual/legal basis of their Claims. Could
the other Party argue that it may be prejudiced if
the contractual/legal basis is changed? Surely not if
the arbitrator can decide on the Claim based on
2
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2
EmployersContractorsAndClaims/GMC/2018(1)/20/CLAL
arguments that have not been put forth at the
DAAB stage. Therefore, it is difficult to see why
specifying the contractual/legal basis at the fully
detailed Claim stage is so important.
Other items:
• Contemporary records – Parties are ordered to
keep contemporary records of the Claim, and
the Engineer may monitor and inspect these
records and instruct the Contractor to keep
additional records.
• Additional particulars – Additional particulars
are requested by way of Notice describing them
and the reasons for requiring them. The
Engineer must issue a response on the
contractual/legal arguments within 42 days and
then its agreement or determination once it
receives the additional particulars.
• Continuing effect – For Claims with continuing
effect, the fully detailed Claim is interim and
the Party must serve further interim particulars
at monthly intervals. These interim particulars
are not subject to the time requirements that
apply to the first fully detailed Clam.
• IPC – Until a Claim is agreed or determined,
IPCs must include the amount that has been
reasonably substantiated as due.
• Set-off – Employers can only set off against or
make any deduction from amounts due to the
Contractor if they follow the claims procedure.
Article Author
Gabriel Mulero Clas2
Email: gabriel.muleroclas@corbett.co.uk
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Clause 21: Disputes and Arbitration
Written by Sara Ehsani1

Clause 20 of 1999 Yellow Book which
covered the multi-tier dispute resolution
provisions, has been divided into two parts
in the 2017 Yellow Book, clause 20 and
clause 21. Clause 20 of 2017 Yellow Book
now covers the Claims to the Engineer and
Clause 21 covers Disputes and Arbitration.
The dispute resolution mechanism in the 2017
Yellow Book still contains the following steps:
• Making a claim to the Engineer,
• Referring to the DAB,
• Attempting Amicable Settlement, and
• ICC Arbitration.
provide assistance and/or informally discuss
and attempt to resolve any issue or
disagreement.
- Reference of a dispute to the DAAB will be
deemed to interrupt the applicable limitation
period unless prohibited by the law.
- The amount awarded by the DAAB or the
Arbitral Tribunal to any party shall become
immediately payable without any certification
or Notice.
- The DAAB decisions are now expressly binding
on the Engineer.

- A Notice of Dissatisfaction (NOD) can be

The main differences introduced by the 2017 Yellow drafted in respect of parts of the DAAB’s
Book are as follows: decision. The parts specified in the NOD and
any parts affected by such part, are deemed to
- There is now a Dispute Avoidance/Adjudication
be severable from the rest of the decision. The
Board (DAAB) rather than a Dispute
rest of the DAAB’s decision shall be final and
Adjudication Board (DAB).
binding on the Parties.

- There is now a standing DAAB rather than an ad

- Non-compliance with the binding but not final
hoc DAB. The DAAB is appointed at the outset
decision of the DAAB can be directly referred to
unless Parties otherwise agree.
Arbitration under the 2017 Yellow Book and the
Arbitral Tribunal has the power to issue an
- If one Party refuses to sign a DAAB agreement
interim or provisional measure or an award
within 14 days of the other Party’s request to do
enforcing the decision. The provisional measure
so, then the appointing entity or official named
or an award is subject to the express reservation
in the Contract Data appoints the member after
that the rights of the Parties are reserved until
which the Parties and the member(s) are
the merits of the dispute are resolved by an
deemed to have signed the DAAB Agreement.
award.

- Similar to the 2008 Gold Book, a new sub-clause

- The amicable settlement period has been
for avoidance of disputes has been introduced.
reduced from 56 days to 28 days.
This allows the parties to ask the DAAB to

1
Sara Ehsani is a Lawyer at Corbett & Co. International Construction Lawyers Ltd. She can be contacted at sara.ehsani@corbett.co.uk

Tel: + 44 (0)20 8614 6200

Fax: + 44 (0)20 8614 6222
Email: info@corbett.co.uk
1
DisputesAndArbitration/SE/2018(1)/21/CLAL www.corbett.co.uk
 Article Author
Sara Ehsani 2

Email: sara.ehsani@corbett.co.uk

2
The contents of this article should not be treated as legal advice. Please
contact the lawyers at Corbett & Co before acting on or relying upon
anything stated in this article.

Tel: + 44 (0)20 8614 6200

Fax: + 44 (0)20 8614 6222
Email: info@corbett.co.uk
2
DisputesAndArbitration/SE/2018(1)/21/CLAL www.corbett.co.uk